UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
Washington, D. C. 20549
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|x| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 3, 1997
OR
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 0-15385
ONE PRICE CLOTHING STORES, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 57-0779028
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Highway 290, Commerce Park
1875 East Main Street
Duncan, South Carolina 29334
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (864) 433-8888
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Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
The number of shares of the Registrant's Common Stock outstanding as
of June 4, 1997 was 10,435,531.
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INDEX
ONE PRICE CLOTHING STORES, INC. AND SUBSIDIARIES
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets - May 3, 1997, February
1, 1997 and May 4, 1996
Condensed consolidated statements of income - Three-month
period ended May 3, 1997 and May 4, 1996
Condensed consolidated statements of cash flows - Three-month
period ended May 3, 1997 and May 4, 1996
Notes to unaudited condensed consolidated financial statements -- May 3, 1997
Independent accountants' report on review of interim financial information
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
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SIGNATURES
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PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS
One Price Clothing Stores, Inc. and Subsidiaries
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May 3, February 1, May 4,
1997 1997 1996
(Unaudited) (1) (Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,996,000 $ 2,557,000 $ 1,149,000
Merchandise inventories 53,839,000 48,371,000 44,407,000
Federal and state income taxes receivable 2,929,000 4,237,000 4,405,000
Deferred income taxes 2,290,000 1,935,000 2,202,000
Other current assets 5,369,000 4,791,000 5,571,000
TOTAL CURRENT ASSETS 67,423,000 61,891,000 57,734,000
PROPERTY AND EQUIPMENT, at cost 58,305,000 57,608,000 57,148,000
Less accumulated depreciation 22,533,000 21,457,000 18,804,000
35,772,000 36,151,000 38,344,000
OTHER ASSETS 2,949,000 2,925,000 3,024,000
$106,144,000 $100,967,000 $ 99.102,000
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 27,729,000 $ 25,908,000 $ 18,268,000
Current portion of long-term debt and note payable 15,514,000 16,565,000 17,782,000
Sundry liabilities 7,977,000 6,249,000 8,110,000
TOTAL CURRENT LIABILITIES 51,220,000 48,722,000 44,160,000
LONG-TERM DEBT 5,921,000 4,868,000 6,184,000
DEFERRED INCOME TAXES AND
OTHER NON-CURRENT LIABILITIES 3,217,000 3,035,000 2,364,000
SHAREHOLDERS' EQUITY Preferred Stock, par value $0.01 --authorized and unissued
500,000 shares Common Stock, par value $0.01 --authorized 35,000,000 shares,
issued and
outstanding 10,435,531, 10,435,531 and 10,335,031 shares 104,000 104,000 103,000
Additional paid-in capital 11,453,000 11,453,000 11,002,000
Retained earnings 34,229,000 32,785,000 35,289,000
45,786,000 44,342,000 46,394,000
$106,144,000 $100,967,000 $99,102,000
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(1) Derived from audited financial statements
See notes to unaudited condensed consolidated financial statements
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
One Price Clothing Stores, Inc. and Subsidiaries
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Three-Month Period Ended
May 3, May 4,
1997 1996
NET SALES $ 78,899,000 $ 76,294,000
Cost of goods sold, distribution and buying costs 49,370,000 47,567,000
GROSS MARGIN 29,529,000 28,727,000
Selling, general and administrative expenses 19,032,000 18,392,000
Store rent and related expenses 6,297,000 6,548,000
Depreciation and amortization expense 1,223,000 1,189,000
Interest expense 586,000 561,000
27,138,000 26,690,000
Interest income 14,000 11,000
NET EXPENSES 27,124,000 26,679,000
INCOME BEFORE INCOME TAXES 2,405,000 2,048,000
Provision for income taxes 961,000 811,000
NET INCOME $ 1,444,000 $ 1,237,000
Net income per common share - Notes B and D $ 0.14 $ 0.12
Weighted average common shares outstanding - Note B 10,464,462 10,343,946
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See notes to unaudited condensed consolidated financial statements
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
One Price Clothing Stores, Inc. and Subsidiaries
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Three-Month Period Ended
May 3, May 4,
1997 1996
OPERATING ACTIVITIES:
Net income $ 1,444,000 $ 1,237,000
Adjustments to reconcile net income
to net cash provided by (used in) operating activities:
Depreciation and amortization 1,223,000 1,189,000
Decrease in other noncurrent assets 36,000 175,000
Increase in other noncurrent liabilities 235,000 40,000
Deferred income tax (benefit) provision (400,000) 508,000
Loss on disposal of property and equipment 228,000
206,000
Changes in operating assets and liabilities (1,324,000) (6,974,000)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
1,442,000 (3,619,000)
INVESTING ACTIVITIES:
Purchases of property and equipment (893,000) (431,000)
Purchases of other noncurrent assets (101,000) (44,000)
NET CASH USED IN INVESTING ACTIVITIES (994,000) (475,000)
FINANCING ACTIVITIES:
Net borrowings from revolving credit facility 396,000 3,651,000
Proceeds from long-term debt borrowings -- 7,500,000
Repayment of long-term debt (394,000) (5,500,000)
Debt financing costs incurred -- (800,000)
Payment of capital lease obligation (21,000) --
Increase (decrease) in amount due to related party 10,000 (12,000)
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES
(9,000) 4,839,000
INCREASE IN CASH AND CASH EQUIVALENTS 439,000 745,000
Cash and cash equivalents at beginning of period 2,557,000 404,000
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,996,000 $ 1,149,000
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 460,000 $ 576,000
Income taxes paid 45,000 33,000
Noncash financing activity - capital leases 10,000 --
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See notes to unaudited condensed consolidated financial statements
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
One Price Clothing Stores, Inc. and Subsidiaries
May 3, 1997
NOTE A -- BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements are unaudited and
include the accounts of One Price Clothing Stores, Inc. and its wholly-owned
subsidiaries (the "Company"). All significant intercompany accounts and
transactions have been eliminated in consolidation.
These financial statements have been prepared in accordance with generally
accepted accounting principles for interim financial information and the
instructions of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
For interim reporting, the Company uses an estimated gross profit as calculated
on a current quarterly basis by its inventory management system. Inventories are
stated on the first-in, first-out (FIFO) retail method.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included. Due
to the seasonality of the Company's sales, operating results for the three-month
period ended May 3, 1997 are not necessarily indicative of the results that may
be expected for the year ending January 31, 1998. For further information, refer
to the financial statements and footnotes thereto included in the Company's
Annual Report on Form 10-K for the year ended February 1, 1997.
NOTE B -- EARNINGS PER SHARE
Earnings per share are computed based upon the weighted average number of common
and common equivalent shares outstanding. Common equivalent shares consist of
shares under option.
NOTE C - CREDIT FACILITIES
In May 1997, the Company amended its financing arrangements with its lender. The
agreement continues to provide a revolving credit facility of up to $37,500,000
(including a letter of credit sub-facility of up to $25,000,000). In addition to
providing for a two-year extension of the agreement through March 31, 2000, the
amendment increased the term loan portion of the agreement by approximately
$1,450,000, thereby increasing the balance of the term loan portion of the
facility to $7,500,000. Commencing June 1, 1997, the amended term loan is
payable in 57 consecutive equal monthly installments plus interest. If the
credit facility is not renewed before expiration, the outstanding balance under
the term loan will be due and payable at that time. Certain fees may be payable
by the Company for early termination of the credit agreement. Borrowings under
the credit agreement are collateralized by all assets owned by the Company
during the term of the agreement and bear interest, at the Company's option
(subject to certain limitations in the agreement), at the prime rate plus 0.5%
or the Adjusted Eurodollar Rate, as defined, plus 2.5%. Maximum borrowings under
the revolving credit facility and utilization of the letter of credit facility
are based on a borrowing base formula determined with respect to eligible
inventory (as defined in the agreement). Availability under the revolving credit
facility will fluctuate in accordance with the Company's seasonal variations in
inventory levels. At May 3, 1997, the Company had approximately $10.3 million of
excess availability under the borrowing base formula (before reflecting the
impact of the subsequent amendment of the term loan and utilization of the
additional letter of credit facility described below). The lending formula may
be revised from time to time in response to changes in the composition of the
Company's inventory or other business conditions. Based upon the aforementioned
amendment, current obligations totaling approximately $1,450,000 at May 3, 1997
under the original credit agreement were classified as long-term.
The Company's credit agreement contains certain covenants which, among other
things, restrict the ability of the Company to incur indebtedness or encumber or
dispose of assets, and prohibit the Company from repurchasing its Common Stock
or paying dividends. Additionally, the Company must maintain a minimum adjusted
net worth (as defined in the agreements) of $34,000,000 and maintain a minimum
working capital, exclusive of amounts outstanding under the credit facilities,
of $5,000,000. The Company was in compliance with these covenants at May 3, 1997
and as of the date of this document.
In May 1997, the Company entered into an agreement with a commercial bank which
provides for a letter of credit facility of up to $3,000,000. The facility
expires at the earlier of June 1998 or termination of the agreement with the
Company's primary lender. Letters of credit issued under the agreement are
collateralized by inventories purchased using such letters of credit. The
agreement contains certain restrictive covenants which are substantially the
same as those under the Company's primary credit agreement discussed above.
NOTE D - EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS
The FASB issued SFAS 128, "Earnings per Share," effective for periods ending
after December 15, 1997. The new standard requires a dual presentation of
"basic" and "diluted" EPS on the face of the income statement. If the Company
had applied the principles of SFAS 128 for the three-month period ended May 3,
1997, basic and diluted EPS would have been the same as reported under APB
Opinion No. 15, the current EPS accounting standard.
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INDEPENDENT ACCOUNTANTS' REVIEW REPORT
Board of Directors and Shareholders of
One Price Clothing Stores, Inc.
Duncan, South Carolina
We have reviewed the accompanying condensed consolidated balance sheets of One
Price Clothing Stores, Inc. and subsidiaries (the "Company") as of May 3, 1997
and May 4, 1996 and the related condensed consolidated statements of income and
cash flows for the three-month periods then ended. These financial statements
are the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and of making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to such condensed consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of One Price Clothing Stores, Inc. and
subsidiary as of February 1, 1997, and the related consolidated statements of
operations, shareholders' equity, and cash flows for the year then ended (not
presented herein); and in our report dated March 14, 1997, we expressed an
unqualified opinion on those financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheet
as of February 1, 1997 is fairly stated, in all material respects, in relation
to the consolidated balance sheet from which it has been derived.
DELOITTE & TOUCHE LLP
Greenville, South Carolina
May 29, 1997
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
Net sales for the quarter ended May 3, 1997 increased 3% to $78,899,000 compared
to $76,294,000 for the quarter ended May 4, 1996. Comparable store sales for the
quarter increased 4% and average store sales increased 10% compared to the same
quarter last year. The Company considers stores that have been open 18 months or
more to be comparable, and there were 608 such stores at May 3, 1997.
Management believes that comparable store sales increases resulted from milder
weather, particularly during the first two months of the quarter, and earlier
placement of spring merchandise in the stores compared to last year. Average
store sales increases were primarily the result of closing older, lower volume
stores during fiscal 1996 and higher average sales from stores the Company
opened in fiscal 1996 and fiscal 1997. Sales trends since May 3, 1997 have been
below expectations. Management believes the recent sales trends are largely due
to unseasonably cold and rainy weather throughout most of the Company's trade
area.
In fiscal 1997, the Company began implementing its previously announced plans to
offer certain categories of merchandise at price points along with its
traditional $7 retail price. There was an average of only 77 stores during the
quarter with the expanded categories of merchandise. At May 3, 1997, the Company
had implemented this concept in approximately 200 stores and plans to complete
implementation by the beginning of the third quarter of fiscal 1997. Although
initial customer reaction to the expanded price merchandise has been favorable,
sales of expanded price merchandise comprised only 2% of total sales for the
first quarter of fiscal 1997. Management expects sales of expanded price
merchandise to have a greater impact on third and fourth quarter sales compared
to sales in the first and second quarters because of the additional categories
of merchandise which can be offered during the cooler selling season and due to
the increase in number of stores in which expanded price points are implemented.
Ten stores were opened during the first quarter of fiscal 1997 and 7
underperforming stores were closed. At May 3, 1997, the Company operated 648
stores, 35 fewer than at quarter-end last year, in 27 states, the District of
Columbia, Puerto Rico and the U.S. Virgin Islands. The Company expects to open
approximately 65 stores, relocate approximately 10 stores and close
approximately 30 stores during fiscal 1997.
The Company's sales and operating results are seasonal, as is typical in the
women's apparel industry. The Company's sales and operating results have been
highest in the first quarter (February - April) and second quarter (May - July)
and lowest in the third quarter (August - October) and fourth quarter (November
- - January). Management expects the offering of additional categories of
merchandise to have a positive impact on future sales and operating results in
the fall selling season.
Gross margin decreased to 37.4% of net sales in the first quarter of fiscal 1997
compared to 37.7% of net sales for the comparable quarter ended May 4, 1996. The
decrease in gross margin as a percentage of net sales for the first quarter of
fiscal 1997 was primarily due to more aggressive markdowns of spring merchandise
compared to the first quarter of fiscal 1996. If current sales trends continue
to fall below expectations, incremental markdowns may adversely affect the
second quarter.
Selling, general and administrative expenses were 24.1% of net sales in both the
first quarter of fiscal 1997 and fiscal 1996. On an average store basis,
however, selling, general and administrative expenses increased 9.8% in the
first quarter of fiscal 1997 compared to the same period last year. This
increase was due to amounts related to equipment rental and personnel costs at
the Company's home office to support current and future growth. The Company also
incurred additional in-store signage and other store-related costs associated
with the implementation of the expanded merchandise offerings. Average salaries
and wages in the Company's stores increased primarily as a result of higher
average sales per store and, in part, due to the increase in the Federal Minimum
Wage which was effective in October 1996. In September 1997, the second phase of
the Federal Minimum Wage increase will take effect. Management estimates the
incremental impact of the increases in the Federal Minimum Wage will increase
store payroll expense in fiscal 1997 by approximately $900,000.
Store rent and related expenses were 8.0% of net sales in the first quarter of
fiscal 1997 compared to 8.6% of net sales for the comparable period last year.
The decrease in store rent when expressed as a percentage of net sales was due
to higher average sales dollars per store experienced in the first quarter of
fiscal 1997 compared to the same period last year. On an average store basis,
however, store rent and related expenses increased 2% for the first quarter of
fiscal 1997 compared to the same quarter last year. This increase in average
store rents was due to entering into leases in markets with higher volume
potential and, therefore, higher base rent structures, as well as the closing of
older, underperforming stores which generally had lower average rent expense.
Management believes that the trend of increasing average store rent expense in
dollars may continue.
Depreciation and amortization expense was 1.6% of net sales in both the first
quarter of fiscal 1997 and fiscal 1996.
The effective tax benefit rate for fiscal 1996 was 36.5%, primarily due to the
estimated limitation in utilizing certain state tax carryforwards. The Company's
estimated annual effective income tax rate for fiscal 1997 is approximately 40%.
Liquidity and Capital Resources
During the first quarter of fiscal 1997, $1,442,000 was provided by operating
activities, primarily due to an increase in the proportion of inventory financed
by accounts payable and a decrease in income taxes receivable. During the first
quarter of fiscal 1996, $3,619,000 was used in operating activities, primarily
due to an increase in inventory and a decrease in accounts payable.
Total merchandise inventories at the end of the first quarter of fiscal 1997 and
fiscal 1996 were $53,839,000 and $44,407,000, respectively. Total inventories at
February 1, 1997 were $48,371,000. The level and source of inventories are
subject to fluctuations because of the Company's opportunistic buying strategy
and prevailing business conditions. The above amounts represent total inventory,
whether located at the stores, in the distribution center or in-transit. Average
inventory in the Company's stores increased approximately 7% to $48,000 per
store at the end of the first quarter of fiscal 1997, consistent with
management's planned levels, from $45,000 per store at the end of the first
quarter of fiscal 1996. Total merchandise inventories at May 3, 1997 increased
compared to the same period last year principally due to an increase in
short-term packaway goods and overseas purchases of summer and transitional
season merchandise which were in-transit to the Company's distribution center.
Total accounts payable and amounts outstanding under the credit facilities,
including the long-term portions thereof, were $49,164,000 and $42,234,000 at
the end of the first quarter of fiscal 1997 and fiscal 1996, respectively. The
increase in accounts payable and amounts outstanding under the credit facilities
is due to funding purchases of short-term packaway goods in advance of the
selling season and direct importing of foreign merchandise which comprised a
larger proportion of total inventory purchases. In comparison, total accounts
payable and amounts outstanding under the credit facilities at February 1, 1997
were $47,341,000. The level of accounts payable and amounts outstanding under
the credit facilities is subject to fluctuations because of the Company's
seasonal operations, opportunistic buying strategy, rate of capital expenditures
and prevailing business conditions.
During the first quarter of fiscal 1997, net cash of $893,000 was used in
investing activities to purchase property and equipment. This consisted
principally of costs incurred to open 10 new stores, relocate 3 stores and
remodel 18 stores. In fiscal 1997, the Company plans to spend approximately $4.0
million on capital expenditures primarily to fund the fiscal 1997 new store
openings, store relocations and remodeling in certain existing stores. During
the first quarter of fiscal 1996, $431,000 was used to purchase property and
equipment for the 10 new stores and 2 relocated stores opened during the period.
The maximum amounts outstanding under the credit facilities, including the
long-term portions thereof, during the first quarter of fiscal 1997 and fiscal
1996 were approximately $24,783,000 and $25,821,000, respectively. The average
amounts outstanding under the credit facilities were approximately $21,916,000
during the first quarter of fiscal 1997 and $22,130,000 during the first quarter
of fiscal 1996. The weighted average interest rates were 8.2% and 7.9% for the
first quarter of fiscal 1997 and fiscal 1996, respectively.
The Company had outstanding documentary letters of credit totaling approximately
$9,259,000 at May 3, 1997 compared to $7,965,000 at May 4, 1996. The increase in
outstanding letters of credit is due to buying a larger proportion of direct
imports of foreign merchandise as a component of total inventory purchases. For
the first three months of fiscal 1997, the Company purchased approximately 30%
of its merchandise directly from foreign sources compared to approximately 25%
for the first three months of fiscal 1996. Management expects this trend to
continue in the foreseeable future. This strategy may affect the level of total
merchandise inventories during the fiscal year and the Company's liquidity and
working capital needs.
In May 1997, the Company amended its financing arrangements with its lender. The
agreement continues to provide a revolving credit facility of up to $37,500,000
(including a letter of credit sub-facility of up to $25,000,000). In addition to
providing for a two-year extension of the agreement through March 31, 2000, the
amendment increased the term loan portion of the agreement by approximately
$1,450,000, thereby increasing the balance of the term loan portion of the
facility to $7,500,000. Commencing June 1, 1997, the amended term loan is
payable in 57 consecutive equal monthly installments plus interest. If the
credit facility is not renewed before expiration, the outstanding balance under
the term loan will be due and payable at that time. Certain fees may be payable
by the Company for early termination of the credit agreement. Borrowings under
the credit agreement are collateralized by all assets owned by the Company
during the term of the agreement and bear interest, at the Company's option
(subject to certain limitations in the agreement), at the prime rate plus 0.5%
or the Adjusted Eurodollar Rate, as defined, plus 2.5%. Maximum borrowings under
the revolving credit facility and utilization of the letter of credit facility
are based on a borrowing base formula determined with respect to eligible
inventory (as defined in the agreement). Availability under the revolving credit
facility will fluctuate in accordance with the Company's seasonal variations in
inventory levels. At May 3, 1997, the Company had approximately $10.3 million of
excess availability under the borrowing base formula (before reflecting the
impact of the subsequent amendment of the term loan and utilization of the
additional letter of credit facility discussed below). The lending formula may
be revised from time to time in response to changes in the composition of the
Company's inventory or other business conditions. Based upon the aforementioned
amendment, current obligations totaling approximately $1,450,000 at May 3, 1997
under the original credit agreement were classified as long-term.
The Company's credit agreement contains certain covenants which, among other
things, restrict the ability of the Company to incur indebtedness, or encumber
or dispose of assets, and prohibit the Company from repurchasing its Common
Stock or paying dividends. Additionally, the Company must maintain a minimum
adjusted net worth (as defined in the agreements) of $34,000,000 and maintain a
minimum working capital, exclusive of amounts outstanding under the credit
facilities, of $5,000,000. The Company was in compliance with these covenants at
May 3, 1997 and as of the date of this document.
In May 1997, the Company entered into an agreement with a commercial bank which
provides for a letter of credit facility of up to $3,000,000. The facility
expires at the earlier of June 1998 or termination of the agreement with the
Company's primary lender. Letters of credit issued under the agreement are
collateralized by inventories to be purchased using such letters of credit. The
agreement contains certain restrictive covenants which are substantially the
same as those under the Company's primary credit facility discussed above.
For the three-month period ended May 3, 1997, $9,000 was used in financing
activities. During the first quarter of fiscal 1996, net cash of $4,839,000 was
provided by financing activities, principally due to net borrowings under the
Company's credit facilities. This level of borrowings was necessary due to a
lower level of vendor financing during a period of seasonal increase in
merchandise inventories.
Management believes that the Company's liquidity requirements in the foreseeable
future will be met principally through the use of its credit facilities and cash
provided by operations. If deemed by management to be in the best interest of
the Company, additional long-term debt, capital leases or other permanent
financing may be considered.
EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS
The FASB issued SFAS 128, "Earnings per Share," effective for periods ending
after December 15, 1997. The new standard requires a dual presentation of
"basic" and "diluted" EPS on the face of the income statement. If the Company
had applied the principles of SFAS 128 for the three-month period ended May 3,
1997, basic and diluted EPS would have been the same as reported under APB
Opinion No. 15, the current EPS accounting standard.
Private Securities Litigation Reform Act of 1995
All statements contained in this document as to future expectations and
financial results should be considered forward-looking statements subject to the
safe harbor created by the Private Securities Litigation Reform Act of 1995. The
Company cautions readers of this Quarterly Report on Form 10-Q that a number of
important factors could cause the Company's actual results in 1997 and beyond to
differ materially from those expressed in such forward-looking statements. These
factors include, but are not limited to, the general economic conditions and
consumer demand; consumer preferences; weather patterns; competitive factors,
including pressure from pricing and promotional activities of competitors; the
impact of excess retail capacity and the availability of desirable store
locations on suitable terms; whether or not the Company's merchandising strategy
to offer expanded categories of merchandise at alternative price points will
increase sales and operating results or increase and attract new customers; the
availability, selection and purchasing of attractive merchandise on favorable
terms; import risks in light of the Company's increasing purchases of foreign
inventory, including potential disruptions and duties, tariffs and quotas on
imported merchandise; and other factors described in the Company's filings with
the Securities and Exchange Commission from time to time. The Company does not
undertake to publicly update or revise its forward-looking statements even if
experience or future changes make it clear that any projected results expressed
or implied therein will not be realized.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
The Company received proxies representing 91.4% of the 10,435,931 shares
outstanding and eligible to vote at the Annual Meeting of the Company's
shareholders held on June 4, 1997. The following summarizes the votes thereat:
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Broker
Matter For Against Abstentions Nonvotes
Election of Directors
Henry D. Jacobs, Jr. 9,523,487 0 16,150 0
Larry I. Kelley 9,523,487 0 16,150 0
David F. Bellet 9,523,337 0 16,300 0
Cynthia R. Cohen 9,522,337 0 17,300 0
Charles D. Moseley, Jr. 9,523,337 0 16,300 0
James M. Shoemaker, Jr. 9,523,307 0 16,300 0
Malcolm L. Sherman 9,523,157 0 16,480 0
Laurie M. Shahon 9,523,487 0 16,150 0
Raymond S. Waters 9,523,487 0 16,150 0
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Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
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(a) The following exhibits are included herein:
10(a) Amendment Number One to the Loan and Security Agreement by and between
Congress Financial Corporation (Southern) as Lender and the Registrant and One
Price Clothing of Puerto Rico, Inc. as Borrowers dated May 16, 1997.
10(b) Continuing Commercial Credit Agreement by and between Carolina First Bank as Lender
and the Registrant, One Price Clothing of Puerto Rico, Inc. and One Price Clothing - U.S.
Virgin Islands, Inc. as Borrowers dated May 16, 1997.
10(c) Stock Option Agreement dated March 26, 1997 between the Registrant and
Larry I. Kelley
11 Computation of Per Share Earnings
15 Acknowledgment of Deloitte & Touche LLP, Independent Accountants
27 Financial Data Schedule (electronic filing only)
(b) On April 1, 1997, the Company filed a report on Form 8-K dated April 1, 1997 to
report the resignation of Henry D. Jacobs, Jr. as President and Chief Executive Officer and to
announce the appointment of Larry I. Kelley as President and Chief Executive Officer as his
successor.
</TABLE>
<PAGE>
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ONE PRICE CLOTHING STORES, INC. (Registrant)
<TABLE>
<S> <C> <C>
Date: June 13, 1997 /s/ Larry I. Kelley
Larry I. Kelley
President and Chief Executive Officer
(principal executive officer)
Date: June 13, 1997 /s/ Stephen A. Feldman
Stephen A. Feldman
Executive Vice President &
Chief Financial Officer
(principal financial officer)
</TABLE>
<PAGE>
ONE PRICE CLOTHING STORES, INC. AND SUBSIDIARIES
EXHIBIT 10(a) -- Amendment Number One to the Loan and Security Agreement by and
between Congress Financial Corporation (Southern) as Lender and the Registrant
and One Price Clothing of Puerto Rico, Inc. as Borrowers dated May 16, 1997.
AMENDMENT NO. 1 TO FINANCING AGREEMENTS
May 16, 1997
One Price Clothing Stores, Inc.
1875 East Main Street
Duncan, South Carolina 29334
One Price Clothing of Puerto Rico, Inc.
1875 East Main Street
Duncan, South Carolina 29334
Gentlemen:
Congress Financial Corporation (Southern) ("Lender"), One Price
Clothing Stores, Inc. ("One Price") and One Price Clothing of Puerto Rico, Inc.
("One Price PR"; and together with One Price, individually referred to as a
"Borrower" and collectively as the "Borrowers") have entered into certain
financing arrangements pursuant to the Loan and Security Agreement, dated March
25, 1996, between the Lender and Borrowers (the "Loan Agreement"), together with
various other agreements, documents and instruments at any time executed and/or
delivered in connection therewith or related thereto (as the same now exist or
may hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced, collectively, the "Financing Agreements"). All capitalized terms used
herein and not herein defined shall have the meanings given to them in the
Financing Agreements.
Borrowers have requested that Lender agree (a) to extend the term of
the Financing Agreements, (b) to make an additional one-time advance to One
Price, (c) to permit certain indebtedness of Borrowers to Carolina First Bank
and (d) to amend the Loan Agreement in connection with the foregoing; and Lender
is willing to agree to such extension, term loan, indebtedness and amendments,
subject to the terms and conditions set forth herein.
In consideration of the foregoing, the mutual agreements and covenants
contained herein and other good and valuable consideration, the parties hereto
agree as follows:
1. Definitions.
(a) Additional Definitions.
(i) Effective the date hereof, the following
terms shall have the respective meanings given to them below and the Loan
Agreement is hereby amended to include, in addition and not in limitation,
each of the following definitions:
<PAGE>
(A) "Amended Term Note" shall mean the Amended
and Restated Term Promissory Note, dated of even date herewith, made by One
Price payable to the order of Lender in the original principal amount of
$7,500,000, as the same now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
(B) "Carolina Bank" shall mean Carolina First
Bank, a South Carolina corporation, and its successors and assigns.
(C) "Carolina Bank Documents" shall mean the
Continuing Commercial Credit Agreement, dated as of the date hereof, by and
among Carolina Bank, One Price, One Price PR and One Price VI and all
agreements, documents, and instruments executed and/or delivered in
connection therewith, as the same now exist or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
(D) "One Price VI" shall mean One Price Clothing
- U.S. Virgin Islands, Inc., a United States Virgin Islands corporation, and
its successors and assigns.
(ii) Effective as of March 25, 1996, the
following term shall have the meaning given to it below and the Loan Agreement
is hereby amended to include, in addition and not in limitation, the following
definition: "Reference Bank" shall mean CoreStates Bank, N.A., or such other
bank as Lender may from time to time designate.
2. Amendments to Certain Definitions.
(i) All references to the term "Term Loan"
herein, in the Loan Agreement and the other Financing Agreements shall be deemed
and each such reference is hereby amended to mean the outstanding Obligations
owed to Lender by One Price consisting of the indebtedness evidenced by the
Amended Term Note.
(ii) All references to the term "Term Promissory
Note" herein, in the Loan Agreement and the other Financing Agreements shall
be deemed and each such reference is hereby amended to mean the Amended Term
Note as defined herein.
(iii) All references to the term "Renewal Date"
herein, in the Loan Agreement and the other Financing Agreements shall be deemed
and each such reference is hereby amended to mean March 31, 2000.
3. Term Loan.
(a) Borrowers hereby acknowledge, confirm and agree that, as
of the date hereof, prior to the effectiveness hereof, the aggregate principal
amount outstanding in respect of the Term Loan is $6,052,631.55. Upon the
effectiveness hereof, subject to the terms and conditions contained herein,
Lender shall make an additional one-time advance to One Price in the amount of
$1,447,368.45. Such advance shall, together with the outstanding balance in
respect to the Term Loan immediately prior thereto, shall thereafter constitute
the Term Loan, in the original principal amount of $7,500,000.
(b) The indebtedness of One Price to Lender arising pursuant
to the Term Loan and including the additional one-time advance provided for
herein is hereby amended and restated as set forth in the Amended Term Note. The
Term Loan shall be (i) evidenced by the Amended Term Note executed and delivered
by One Price to Lender concurrently herewith, (ii) repaid, together with
interest and other amounts due thereunder, in accordance with the terms and
provisions of such Amended Term Note, the Loan Agreement and the other Financing
Agreements, and (iii) secured by all of the Collateral, including, without
limitation, the Real Property subject to the Mortgage.
(c) The amendment and restatement of the Term Loan pursuant to
the Amended Term Note, shall not, in any manner, be construed to constitute
payment of, or impair, limit, cancel or extinguish, or constitute a novation in
respect of, the Obligations evidenced by or arising under the Financing
Agreements, and the liens and security interests securing such Obligations shall
not in any manner be impaired, limited, terminated, waived or released.
4. Encumbrances. Section 9.8 of the Loan Agreement is
hereby amended by adding a new Section 9.8(j) thereto as follows:
"(j) subject to and limited by the Intercreditor Agreement
referred to in Section 9.9(g)(iv) below, the liens and security
interests of Carolina Bank with respect to certain goods purchased
under letters of credit issued by Carolina Bank for the account of
Borrowers and documents of title relating thereto, granted to Carolina
Bank pursuant to the Carolina Bank Documents to secure the indebtedness
of Borrowers and One Price VI to Carolina Bank permitted under Section
9.9(g) below."
5. Indebtedness. Section 9.9 of the Loan Agreement is
hereby amended by adding a new Section 9.9(g) thereto as follows:
"(g) indebtedness of Borrowers to Carolina Bank arising under
the Carolina Bank Documents in respect of letters of credit for the
purchase of Inventory issued for Borrowers' account by Carolina Bank
pursuant to the Carolina Bank Documents; provided, that: (i) the total
principal amount of the indebtedness outstanding at any time thereunder
shall not exceed $3,000,000, (ii) Borrowers shall not, directly or
indirectly, without Lender's prior written consent, (A) amend, modify,
alter or change the terms of such indebtedness or any of the Carolina
Bank Documents as in effect on the date hereof, or (B) redeem, retire,
defease, purchase or otherwise acquire such indebtedness, or set aside
or otherwise deposit or invest any sums for such purpose, (iii)
Borrowers shall furnish to Lender all notices or demands in connection
with such indebtedness either received by Borrowers or on their behalf,
promptly after the receipt thereof, or sent by Borrowers or on their
behalf, concurrently with the sending thereof, as the case may be, and
(iv) Lender shall receive, in form and substance satisfactory to
Lender, an Intercreditor Agreement between Lender and Carolina Bank
duly authorized, executed and delivered by Carolina Bank."
6. Virgin Islands Subsidiary. Borrowers and One Price VI hereby
represent and warrant to Lender that the correct corporate name of
One Price VI is One Price Clothing - U.S. Virgin Islands, Inc.
Accordingly, with respect to (a) the Guarantee, dated as of March 19,
1997, by One Price VI in favor of Lender with respect to the
obligations of One Price to Lender, (b) the Guarantee, dated as of
March 19, 1997, by One Price VI in favor of Lender with respect to
the obligations of One Price PR to Lender, and (c) the
Secretary's Certificate of Directors' Resolutions for One Price VI
with Shareholder's Consent, each of the foregoing are hereby amended by
replacing each reference to "One Price Clothing Stores - U.S. Virgin
Islands, Inc."with "One Price Clothing - U.S. Virgin Islands, Inc.". 7.
Term.
(a) The first sentence of Section 12.1(a) of the Loan
Agreement is hereby deleted in its entirety and the following substituted
therefor:
"(a) This Agreement and the other Financing Agreements shall
become effective as of the date set forth on the first page hereof and
shall continue in full force and effect for a term ending on March 31,
2000 (the "Renewal Date"), and from year to year thereafter, unless
sooner terminated pursuant to the terms hereof."
(b) The first sentence of Section 12.1(c) of the Loan
Agreement is hereby amended by deleting Section 12.1(c)(ii) thereof in its
entirety and adding the following new sections 12.1(c)(ii) and 12.1(c)(iii)
thereto as follows:
"(ii) .75% of the Inventory March 26, 1997 to and
Loan Limit including March 30, 1998
(iii) .25% of the Inventory March 31, 1998 to and
Loan Limit including March 31, 1999."
8. New Address. All references to the address of Lender
in the Loan Agreement and the other Financing Agreements shall be deemed and
each such reference is hereby amended to mean 200 Galleria Parkway, Suite 1500,
Atlanta, Georgia 30339.
9. Extension Fee. In addition to all other fees, charges,
interest and expenses payable by Borrowers to Lender under the Loan Agreement
and the other Financing Agreements, Borrowers shall pay to Lender a fee for
extending the term of the Financing Agreements in the amount of $5,000, which
fee is fully earned and payable on the date hereof and may, at Lender's option,
be charged directly to any of Borrowers' loan account(s).
10. Representations, Warranties and Covenants. In addition to
the continuing representations, warranties and covenants heretofore or hereafter
made by Borrowers to Lender pursuant to the Loan Agreement and the other
Financing Agreements, Borrowers hereby represent, warrant and covenant with and
to Lender as follows (which representation, warranties and covenants are
continuing and shall survive the execution and delivery hereof and shall be
incorporated into and made a part of the Financing Agreements):
(a) Any reports or other items required to be
delivered by Borrowers to Lender under the terms of the Loan Agreement and the
other Financing Agreements with respect to Inventory shall only include as
Eligible Inventory, otherwise Eligible Inventory purchased under letters of
credit issued for Borrowers' account by Carolina Bank, after payment of all
reimbursement obligations to Carolina Bank for drawings in respect of such
Inventory under such letters of credit and following Lender's receipt of a
written acknowledgement from Carolina Bank of the amounts so reimbursed and the
shipments of Inventory covered thereby; and
(b) Borrowers shall provide Lender, in a form
satisfactory to Lender, with monthly reports with respect to the amount of open
letters of credit issued by Carolina Bank for the account of Borrowers, the date
such letters of credit were issued and the status of the shipment of the goods
purchased thereunder.
11. Conditions Precedent. The effectiveness of the
amendments to the Loan Agreement and the other Financing Agreements provided for
herein is conditioned upon the satisfaction of each of the following conditions
precedent in a manner satisfactory to Lender:
(a) Lender shall have received true, correct and complete
copies of the Carolina Bank Documents, duly authorized, executed and delivered
by the parties hereto;
(b) Lender shall have received, in form and substance
satisfactory to Lender, an Intercreditor Agreement between Carolina Bank and
Lender, duly authorized, executed and delivered by Carolina Bank, acknowledged
by Borrowers and One Price VI;
(c) Lender shall have received, in form and substance
satisfactory to Lender, an original of the Amended Term Note, duly authorized,
executed and delivered by One Price;
(d) Lender shall have received, in form and substance
satisfactory to Lender, an updated endorsement to the title insurance policy (or
a new title insurance policy) insuring as of the date hereof and after giving
effect to the additional one-time advance provided herein, Lender's first
priority mortgage lien with respect to the Real Property pursuant to the
Mortgage;
(e) No Event of Default, or act, condition or event which with
notice or passage of time or both would constitute an Event of Default shall
exist or have occurred; and
(f) Lender shall have received an original of this Amendment,
duly authorized, executed and delivered by Borrowers and One Price VI.
12. Miscellaneous.
(a) Entire Agreement; Ratification and Confirmation of the
Financing Agreements. This Amendment contains the entire agreement of the
parties with respect to the subject matter hereof and supersedes all prior or
contemporaneous term sheets, proposals, discussions, negotiations,
correspondence, commitments and communications between or among the parties
concerning the subject matter hereof. This Amendment may not be modified or any
provision waived, except in writing signed by the party against whom such
modification or waiver is sought to be enforced. Except as specifically modified
pursuant hereto, the Financing Agreements are hereby ratified, restated and
confirmed by the parties hereto as of the effective date hereof. To the extent
of conflict between the terms of this Amendment and the Financing Agreements,
the terms of this Amendment shall control.
(b) Governing Law. This Amendment and the rights and
obligations hereunder of each of the parties hereto shall be governed by and
interpreted and determined in accordance with the internal laws of the State of
Georgia, without regard to principles of conflicts of law.
(c) Binding Effect. This Amendment shall be binding upon
and inure to the benefit of each of the parties hereto and their respective
successors and assigns.
(d) Counterparts. This Amendment may be executed in any number
of counterparts, but all of such counterparts shall together constitute but one
and the same agreement. In making proof of this Amendment it shall not be
necessary to produce or account for more than one counterpart thereof signed by
each of the parties hereto.
By the signature hereto of each of their duly authorized officers, all
of the parties hereto mutually covenant and agree as set forth herein.
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Very truly yours,
CONGRESS FINANCIAL CORPORATION
(SOUTHERN)
By: /s/ Morris P. Holloway
Title: First Vice President
</TABLE>
AGREED AND ACCEPTED:
ONE PRICE CLOTHING STORES, INC.
By: /s/C. Burt Duren
Title: Treasurer
ONE PRICE CLOTHING OF PUERTO RICO, INC.
By: /s/C. Burt Duren
Title: Treasurer
[SIGNATURES CONTINUE ON NEXT PAGE]
<PAGE>
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
CONSENTED TO AND AGREED:
ONE PRICE CLOTHING - U.S. VIRGIN ISLANDS, INC.
By: /s/C. Burt Duren
Title: Treasurer
<PAGE>
ONE PRICE CLOTHING STORES, INC. AND SUBSIDIARIES
EXHIBIT 10(b) - Continuing Commercial Credit Agreement by and between Carolina
First Bank as Lender and the Registrant, One Price
Clothing of Puerto Rico, Inc. and One Price Clothing - U.S. Virgin Islands, Inc.
as Borrowers dated May 16, 1997.
CONTINUING COMMERCIAL CREDIT AGREEMENT
by and between
CAROLINA FIRST BANK
as Bank
and
ONE PRICE CLOTHING STORES, INC.
and
ONE PRICE CLOTHING OF PUERTO RICO, INC.
and
ONE PRICE CLOTHING - U.S. VIRGIN ISLANDS, INC.
as Borrowers
Dated: May 16, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
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SECTION 1. DEFINITIONS......................................................................................... 1
1.1 "Application"................................................................................. 2
1.2 "Default Rate"................................................................................ 2
1.3 "Event of Default"............................................................................ 2
1.4 "Letter of Credit Accommodations"............................................................. 2
1.5 "Material Adverse Effect"..................................................................... 2
1.6 "Maximum Credit".............................................................................. 2
1.7 "Obligations"................................................................................. 2
1.8 "Obligor"..................................................................................... 2
1.9 "Payment Account"............................................................................. 2
1.10 "Primary Lender".............................................................................. 2
1.11 "Prime Rate".................................................................................. 2
1.12 "Property".................................................................................... 3
1.13 "Records"..................................................................................... 3
1.14 "Term"........................................................................................ 3
1.15 "Transportation Documents".................................................................... 3
SECTION 2. LETTER OF CREDIT ACCOMMODATIONS...................................................................... 3
2.1 General Terms and Conditions.................................................................. 3
2.2 Bank's Good Faith Interpretation.............................................................. 4
2.3 Noncompliance; Acceptance and Rejection; Extensions and
Amendments.................................................................................... 5
2.4 Borrowers' Assumption of Risk; Indemnification and Hold Harmless.............................. 5
SECTION 3. FEES AND CHARGES..................................................................................... 5
3.1 Closing Fee................................................................................... 5
3.2 Transaction Fees.............................................................................. 5
3.3 Attorney's Fees............................................................................... 5
3.4 Maximum Interest.............................................................................. 6
SECTION 4. CONDITIONS PRECEDENT................................................................................ 6
4.1 Requisite Corporate Action.................................................................... 6
4.2 No Material Adverse Change.................................................................... 6
4.3 Consents, Waivers, Acknowledgements........................................................... 6
4.4 Accurate Representations and Warranties....................................................... 7
4.5 No Event of Default........................................................................... 7
SECTION 5. BANK'S RIGHTS TO THE PROPERTY AND THE
TRANSPORTATION DOCUMENTS...................................................................... 7
5.1 Bank's Ownership Rights....................................................................... 7
5.2 No Waiver by Bank............................................................................. 7
<PAGE>
SECTION 6. COLLECTION AND ADMINISTRATION....................................................................... 7
6.1 Borrowers' Letter of Credit Accounts.......................................................... 7
6.2 Statements.................................................................................... 7
6.3 Payments...................................................................................... 8
6.4 Authorization to Issue Letter of Credit....................................................... 8
6.5 Appointment of One Price as Agent for One Price PR and One Price VI........................... 8
SECTION 7. REPRESENTATIONS AND WARRANTIES....................................................................... 9
7.1 Corporate Existence, Power and Authority; Subsidiaries........................................ 9
7.2 Financial Statements; No Material Adverse Change.............................................. 9
7.3 Chief Executive Office........................................................................ 9
7.4 Tax Returns................................................................................... 9
7.5 Litigation.................................................................................... 10
7.6 Compliance with Other Agreements and Applicable Laws.......................................... 10
7.7 Accuracy and Completeness of Information...................................................... 11
7.8 Interrelated Business......................................................................... 11
7.9 Survival of Warranties; Cumulative............................................................ 11
SECTION 8. AFFIRMATIVE AND NEGATIVE COVENANTS................................................................... 12
8.1 Maintenance of Existence...................................................................... 12
8.2 Compliance with Laws, Regulations, Etc........................................................ 12
8.3 Insurance..................................................................................... 12
8.4 Financial Statements and Other Information.................................................... 13
8.5 Encumbrances.................................................................................. 14
8.6 Adjusted Net Worth............................................................................ 14
8.7 Working Capital............................................................................... 14
8.8 Costs and Expenses............................................................................ 14
8.9 Further Assurances............................................................................ 14
SECTION 9. EVENTS OF DEFAULT AND REMEDIES....................................................................... 15
9.1 Events of Default............................................................................. 15
9.2 Remedies...................................................................................... 16
SECTION 10. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; ..........................................GOVERNING LAW;
17
10.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver......................... 17
10.2 Waiver of Notices............................................................................. 18
10.3 Amendments and Waivers........................................................................ 19
10.4 Waiver of Counterclaims....................................................................... 19
10.5 Indemnification............................................................................... 19
SECTION 11. TERM OF AGREEMENT: MISCELLANEOUS................................................................... 19
11.1 Term.......................................................................................... 19
11.2 Uniform Customs and Practice.................................................................. 20
11.3 Notices....................................................................................... 20
11.4 Partial Invalidity............................................................................ 20
11.5 Successors.................................................................................... 20
11.6 Confidentiality............................................................................... 21
11.7 Entire Agreement.............................................................................. 21
</TABLE>
<PAGE>
CONTINUING COMMERCIAL CREDIT AGREEMENT
This Continuing Commercial Credit Agreement (the "Agreement") dated May
16, 1997 is entered into by and among One Price Clothing Stores, Inc., a
Delaware corporation ("One Price"), One Price Clothing of Puerto Rico, Inc., a
Puerto Rico corporation ("One Price PR"), and One Price Clothing - U.S. Virgin
Islands, Inc., a United States Virgin Islands corporation ("One Price VI" and
together with One Price and One Price PR, individually referred to as a
"Borrower" and collectively as "Borrowers") and Carolina First Bank, a South
Carolina corporation ("Bank").
W I T N E S S E T H:
WHEREAS, Borrowers have requested that Bank establish a facility for
the issuance from time to time, at Bank's option, of one or more International
Documentary Letters of Credit (each being hereafter referred to individually as
a "Letter of Credit" and collectively as "Letters of Credit"); and
WHEREAS, Bank is willing to provide Letter of Credit Accommodations
on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. DEFINITIONS
All capitalized terms, unless otherwise defined herein, shall have the
meanings given in the Loan and Security Agreement between One Price, One Price
PR and Congress Financial Corporation (Southern), dated March 25, 1996, and
amended in May, 1997 (the "Congress Agreement"). The Congress Agreement as in
existence as of the date of this Agreement is attached as Exhibit A. All terms
used herein which are defined in Article 1 or Article 9 of the Uniform
Commercial Code shall have the meanings given therein unless otherwise defined
in this Agreement. All references to the plural herein shall also mean the
singular and to the singular shall also mean the plural. All references to
Borrowers shall, unless the context otherwise expressly provides, mean any
Borrower and all Borrowers, individually and collectively, jointly and
severally. All references to Borrowers and Bank pursuant to the definitions set
forth in the recitals hereto, or to any other person herein, shall include their
respective successors and assigns. The words "hereof", "herein", "hereunder",
"this Agreement" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not any particular provision of this
Agreement and as this Agreement now exists or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced. An Event of
Default shall exist or continue or be continuing until such Event of Default is
waived in accordance with Section 10.3. Any accounting term used herein unless
otherwise defined in this Agreement shall have the meaning customarily given to
such term in accordance with GAAP. For purposes of this Agreement, the following
terms shall have the respective meanings given to them below:
1.1 "Application" shall mean the request made by any Borrower to Bank
for Letter of Credit Accommodations on a form identical to Exhibit B.
1.2 "Default Rate" shall mean the rate of interest for which Borrowers
are obligated to pay to Bank after an Event of Default on unpaid amounts due to
Bank pursuant to Section 2.1(e), and shall be the lesser of (a) Bank's Prime
Rate plus two and one-half (2-1/2%) percent per annum, or (b) the Maximum
Interest Rate.
1.3 "Event of Default" shall mean the occurrence or existence of any
event or condition described in Section 9.1 hereof.
1.4 "Letter of Credit Accommodations" shall mean the Letters of Credit,
merchandise purchase or other guaranties which are from time to time issued or
opened by Bank for the account of any Borrower.
1.5 "Material Adverse Effect" shall mean any material adverse effect
upon the business, assets or financial condition of Borrowers, or any material
adverse effect upon the Property or Bank's rights or interests in or with
respect to the Property.
1.6 "Maximum Credit" shall mean $3,000,000.
1.7 "Obligations" shall mean any and all Letters of Credit
Accommodations and all other obligations, liabilities and indebtedness of every
kind, nature and description owing by any or all Borrowers to Bank and/or its
affiliates, including principal, interest, charges, fees, costs and expenses,
however evidenced, whether as principal, surety, endorser, guarantor or
otherwise, whether arising under this Agreement or otherwise, whether now
existing or hereafter arising, whether arising before, during or after the term
of this Agreement or after the commencement of any case with respect to any
Borrower under the United States Bankruptcy Code or any similar statute
(including, without limitation, the payment of interest and other amounts which
would accrue and become due but for the commencement of such case), whether
direct or indirect, absolute or contingent, joint or several, due or not due,
primary or secondary, liquidated or unliquidated, secured or unsecured, and
however acquired by Bank.
1.8 "Obligor" shall mean any guarantor, endorser, acceptor, surety or
other person liable on or with respect to the Obligations or who is the owner of
any property which is security for the Obligations, other than a Borrower.
1.9 "Payment Account" shall have the meaning set forth in Section
6.3 hereof.
1.10 "Primary Lender" shall mean Congress Financial Corporation
(Southern).
1.11 "Prime Rate" shall mean the rate from time to time publicly
announced by Bank, or its successors, at its office in Columbia, South Carolina,
as its prime rate, whether or not such announced rate is the best rate available
at such bank.
1.12 "Property" shall mean all goods and merchandise shipped by any
vendor at the request of any Borrower for which Bank has issued Letter of Credit
Accommodations and for which Borrowers have not complied with this Agreement in
general, and Section 2.1(e) in particular.
1.13 "Records" shall mean, as to each Borrower, all of such Borrower's
present and future books of account of every kind or nature, purchase and sale
agreements, invoices, ledger cards, bills of lading and other shipping evidence,
statements, correspondence, memoranda, credit files and other data relating to
the Property, together with the tapes, disks, diskettes and other data and
software storage media and devices, file cabinets or containers in or on which
the foregoing are stored (including any rights of such Borrower with respect to
the foregoing maintained with or by any other person).
1.14 "Term" shall mean the period of time set forth in Section 11.1
during which this Agreement shall continue in full force and effect.
1.15 "Transportation Documents" shall mean all documents relating to
the Property shipped under or pursuant to or in connection with the Letter of
Credit Accommodations under this Agreement, including but not limited to (a)
import, export or other licenses for import, export or shipping of any and all
of the Property; (b) bills of lading of other documents issued or purporting to
be issued by or on behalf of any carrier which acknowledges receipt of the
Property for transportation, and (c) insurance policies and insurance
certificates relating to the Property.
SECTION 2. LETTER OF CREDIT ACCOMMODATIONS
2.1 General Terms and Conditions. Subject to, and upon the terms and
conditions contained herein, at the request of a Borrower, Bank agrees to
issue one or more Letters of Credit for the account of such Borrower containing
terms and conditions acceptable to Bank.
(a) The purpose for the Letter of Credit Accommodations shall
be for Borrower's purchase of goods and merchandise that, upon satisfaction of
Borrowers' requirements under Section 2.1(e), would qualify as "Eligible
Inventory" under the Congress Agreement.
(b) The aggregate amount of all outstanding Letters of Credit
issued by Bank shall not at any time exceed the Maximum Credit.
(c) Except in Bank's sole discretion, no single Letter of
Credit shall be available to Borrower in an amount in excess of $200,000.
(d) The term of each individual Letter of Credit issued shall
not exceed 120 days, and the expiration date of a Letter of Credit shall not
extend beyond June 30, 1998.
(e) Borrowers shall establish and maintain a depository
account with Bank with a minimum balance of $10,000 at all times. At least one
day prior to Bank's release of the Transportation Documents, Borrowers shall
transfer into this account, on demand, or have sufficient funds available in the
account in fully collected United States currency, to cover the amount specified
under each Letter of Credit.
(f) All Letters of Credit issued by Bank shall be payable at
sight and shall provide for the Transportation Documents to be consigned to the
order of Bank.
(g) All negotiations as to amendments, extensions,
or discrepancies of Transportation Documents shall be at the sole discretion of
Bank.
(h) No new Letter of Credit Accommodations shall be available
to a Borrower at any time an Event of Default exists or has occurred and is
continuing.
(i) Except for contrary instructions given by Borrowers to
Bank prior to the issuance of a Letter of Credit: (i) Bank may receive and
accept as Transportation Documents relating to Property any document issued or
purporting to be issued by or on behalf of any carrier which acknowledges
receipt of Property for transportation, regardless of the specific provisions of
the documents, the date of each document shall be deemed the date of shipment of
the Property mentioned therein, and any Transportation Document issued by or on
behalf of an ocean carrier may be accepted by Bank whether or not the entire
transportation is by water; (ii) part shipment and/or shipments in excess of the
quantity called for in the Letter of Credit may be made, and Bank may honor the
relative drafts, the liability of Borrowers to reimburse Bank for payments made
or obligations incurred on such drafts being limited to the amount of the Letter
of Credit; (iii) if the Letter of Credit specifies shipments in installments
within stated periods, and the shipper fails to ship in any designated period,
the Letter of Credit shall not be available for that or any subsequent
installments; (iv) Bank may receive and accept as documents of Insurance either
insurance policies or insurance certificates which need not be for an amount of
insurance greater than the amount paid by Bank or relative to a Letter of
Credit; and (v) Bank may receive or pay as complying with the terms of the
Letter of Credit any drafts or other documents otherwise in order, which may be
signed by, or issued to, the trustee in bankruptcy of, or the receiver of any of
the Property of, the party in whose name the Letter of Credit provides that any
drafts or other document should be drawn or issued.
(j) Nothing contained herein shall be deemed or construed to
grant Borrowers any right or authority to pledge the credit of Bank in any
manner.
2.2 Bank's Good Faith Interpretation2.2Bank's Good Faith
Interpretation. Borrowers shall be bound by any interpretation made in good
faith by Bank under or in connection with any Letter of Credit or any documents,
drafts or acceptances thereunder, notwithstanding that such interpretation may
be inconsistent with any instructions of Borrowers.
2.3 Noncompliance; Acceptance and Rejection; Extensions and
AmendmentsNoncompliance; Acceptance and Rejection; Extensions and Amendments.
Bank shall have the sole and exclusive right and authority to, and Borrowers
shall not: (a) at any time an Event of Default exists or has occurred and is
continuing, (i) approve or resolve any questions of noncompliance of the
Transportation Documents, (ii) give any instructions as to acceptance or
rejection of any Transportation Documents or goods, (iii) execute any and all
applications for steamship or airway guaranties, indemnities or delivery orders,
or (iv) transfer to and/or register in the name of Bank or its nominee all or
part of the Property and to do so with or without notice to Borrowers, and (b)
at all times, (i) grant any extensions of the maturity of, time of payment for,
or time of presentation of, any drafts, acceptances, or Transportation
Documents, and (ii) agree to any amendments, renewals, extensions,
modifications, changes or cancellations of any of the terms or conditions of any
of the Applications, Letters of Credit or Transportation Documents thereunder.
Bank may take such actions either in its own name or in the name of a Borrower.
2.4 Borrowers' Assumption of Risk; Indemnification and Hold
HarmlessBorrowers' Assumption of Risk; Indemnification and Hold Harmless.
Borrowers assume all risks with respect to the acts or omissions of the
beneficiary of any Letter of Credit, and for such purposes the beneficiary shall
be deemed the agent of Borrowers. Borrowers assume all risks for, and agree to
pay, all foreign, Federal, State and local taxes, duties and levies relating to
any goods subject to any Letter of Credit or any Transportation Documents
thereunder. Borrowers shall indemnify and hold Bank harmless from and against
any and all losses, claims, damages, liabilities, costs and expenses which Bank
may suffer or incur in connection with any Letter of Credit and any
Transportation Documents relating thereto. Borrowers hereby release and hold
Bank harmless from and against any acts, waivers, errors, delays or omissions
with respect to or relating to any Letter of Credit. The provisions of this
Section 2.4 shall survive the payment of Obligations and the termination or
non-renewal of this Agreement.
SECTION 3. FEES AND CHARGESSECTION.
3.1 Closing Fee. Borrowers shall pay to Bank as a
closing fee the amount of $30,000 which shall be fully earned as of and payable
on the date hereof.
3.2 Transaction Fees. Borrowers shall pay to Bank for each
Letter of Credit issued the transaction fees as shown on Exhibit C
3.3 Attorney's Fees. Borrowers shall pay to Bank
immediately upon demand the full amount of all reasonable costs and expenses,
including attorneys fees, incurred by Bank (a) in connection with negotiation
and preparation of this Agreement, and (b) for which Borrowers are obligated to
reimburse Bank in accordance with the terms of Section 2.1(e).
3.4 Maximum Interest. Notwithstanding anything to the
contrary contained in this Agreement, in no event whatsoever shall the aggregate
of all amounts that are contracted for, charged or received by Bank pursuant to
the terms of this Agreement and that are deemed interest under applicable law
exceed the Maximum Interest Rate. No agreements, conditions, provisions or
stipulations contained in this Agreement, or any Event of Default, or the
exercise by Bank of the right to accelerate the payment or the maturity of all
or any portion of the Obligations, or the exercise of any option whatsoever
contained in this Agreement, or the prepayment by Borrowers of any of the
Obligations, or the occurrence of any event or contingency whatsoever, shall
entitle Bank to contract for, charge or receive in any event, interest or any
charges, amounts, premiums or fees deemed interest by applicable law in excess
of the Maximum Interest Rate. In no event shall Borrowers be obligated to pay
interest or such amounts as may be deemed interest under applicable law in
amounts which exceed the Maximum Interest Rate. All agreements, conditions or
stipulations, if any, which may in any event or contingency whatsoever operate
to bind, obligate or compel Borrowers to pay interest or such amounts which are
deemed to constitute interest in amounts which exceed the Maximum Interest Rate
shall be (i) without binding force or effect, at law or in equity, to the extent
of the excess of interest or such amounts which are deemed to constitute
interest over such Maximum Interest Rate, and (ii) deemed amended to conform to
the provisions of this Section 3.4.
SECTION 4. CONDITIONS PRECEDENTSECTION. Each of the following is a condition
precedent to Bank issuing any Letter of Credit hereunder:
4.1 Requisite Corporate Action. All requisite corporate action and
proceedings in connection with this Agreement shall be satisfactory in form and
substance to Bank, and Bank shall have received all information and copies of
all documents, including, without limitation, records of requisite corporate
action and proceedings which Bank may have requested in connection therewith,
such documents where requested by Bank or its counsel to be certified by
appropriate corporate officers or governmental authorities.
4.2 No Material Adverse Change. No material adverse change shall have
occurred in the consolidated assets, business or prospects of Borrowers since
the date of Borrowers' consolidated financial statement for the fiscal year
ended February 1, 1997. No material change or event shall have occurred which
would impair the ability of any Borrower or any Obligor to perform its
obligations hereunder or of Bank to enforce the Obligations or realize upon the
Property.
4.3 Consents, Waivers, Acknowledgements. Bank shall have received, in
form and substance satisfactory to Bank, all consents, waivers,
acknowledgments and other agreements from Primary Lender and other third
persons which Bank may deem necessary or desirable in order to permit,
protect and perfect its rights in or liens upon the Transportation
Documents and the Property or to effectuate the provisions or purposes of
this Agreement, including, without limitation, written consent from Primary
Lender for Borrowers to enter into this Agreement and to exercise any
privileges hereunder with respect to the issuance of Letters of Credit,
acknowledgements by lessors, mortgagees and warehousemen of Bank's
ownership rights or security interests in the Transportation Documents and
the Property, waivers by such persons of any security interests, liens or
other claims by such persons to the Transportation Documents and the
Property and agreements permitting Bank access to, and the right to
exercise its rights and remedies and otherwise deal with the Transportation
Documents and the Property.
4.4 Accurate Representations and Warranties. All representations and
warranties contained herein shall be true and correct in all material
respects with the same effect as though such representations and warranties
had been made on and as of the date of providing each such Letter of Credit
Accommodation and after giving effect thereto.
4.5 No Event of Default. No Event of Default and no event or condition
which, with notice or passage of time or both, would constitute an Event
of Default, shall exist or have occurred and be continuing on and as of the date
of providing each such Letter of Credit Accommodation and after giving effect
thereto.
5. BANK'S RIGHTS TO THE PROPERTY AND THE TRANSPORTATIONDOCUMENTS. Borrowers
recognize and admit that Bank has the following rights until the
Borrowers have satisfied the requirements of Section 2.1(e).
5.1 Bank's Ownership Rights. Borrowers have conveyed and assigned to Bank
all rights they may have in the Property and the Transportation Documents, and
Bank shall have the unqualified right to the possession and disposal of any and
all Property and Transportation Documents.
5.2 No Waiver by Bank. Nothing Bank does or attempts
to do, including the sale or disposal of the Property or the transfer and
assignment of the Transportation Documents, in connection with protecting its
rights in the Property and the Transportation Documents shall operate as a
waiver or an estoppel to its right to be paid for Borrowers' Obligations
pursuant to Section 2.
SECTION 6. COLLECTION AND ADMINISTRATION.
6.1 Borrowers' Letter of Credit Accounts. Bank shall maintain one
or more Letter of Credit account(s) on its books in which shall be recorded
(a) all Letters of Credit and the Property, (b) all payments made by or on
behalf of Borrowers and (c) all other appropriate debits and credits
related to Borrowers' Obligations as provided in this Agreement, including,
without limitation, fees, charges, costs, expenses and interest. All
entries in the Letter of Credit account(s) shall be made in accordance with
Bank's customary practices as in effect from time to time.
6.2 Statements. Bank shall render to One Price (for itself
and on behalf of One Price PR and One Price VI) (i) a monthly outstanding Letter
of Credit statement setting forth the Maximum Credit, all draws made during the
Term, current outstanding Letters of Credit, and the expiration dates of all
Letters of Credit; and (ii) a statement of fees as each Letter of Credit is
issued setting forth the amount of fees, costs and expenses due to Bank from
Borrowers. Each such statement shall be subject to subsequent adjustment by Bank
but shall, absent manifest errors or omissions, be considered correct and deemed
accepted by Borrowers and conclusively binding upon Borrowers as an account
stated except to the extent that Bank receives a written notice from any
Borrower of any specific exceptions of such Borrower thereto within thirty (30)
days after the date such statement has been mailed by Bank. Until such time as
Bank shall have rendered to One Price a written statement as provided above, the
balance(s) in Borrowers' Letter of Credit account(s) shall be presumptive
evidence of the amounts due and owing to Bank by Borrowers.
6.3 Payments. All statements for fees, costs and expenses shall
be paid to Bank at the time payment is effected on Letter of Credit draws.
Borrowers shall make all payments to Bank on the Obligations free and clear of,
and without deduction or withholding for or on account of, any setoff,
counterclaim, defense, duties, taxes, levies, imposts, fees, deductions,
withholding, restrictions or conditions of any kind. If after receipt of any
payment of, or proceeds of Property applied to the payment of, any of the
Obligations, Bank is required to surrender or return such payment or proceeds to
any Person for any reason, then the Obligations intended to be satisfied by such
payment or proceeds shall be reinstated and continue and this Agreement shall
continue in full force and effect as if such payment or proceeds had not been
received by Bank. Borrowers shall be liable to pay to Bank, and each Borrower
does hereby indemnify and hold Bank harmless for the amount of any payments or
proceeds surrendered or returned. This Section 6.3 shall remain effective
notwithstanding any contrary action which may be taken by Bank in reliance upon
such payment or proceeds. This Section 6.3 shall survive the payment of the
Obligations and the termination or non-renewal of this Agreement.
6.4 Authorization to Issue Letter of Credit. Bank is authorized
to issue Letters of Credit based upon a facsimile of the front page of an
Application, the form of which is attached hereto as Exhibit B, received
from anyone purporting to be an officer of a Borrower (including One Price
for itself and/or on behalf of One Price PR and/or One Price VI) or other
authorized person. The facsimile of the Application shall
be sent by Borrowers to the address and facsimile number shown below. All
Applications for Letters of Credit hereunder shall specify the date on which the
requested issuance is to occur (which day shall be a Business Day) and the
amount of the requested Letter of Credit. Applications received after 12:00 noon
Eastern Time on any day shall be deemed to have been made as of the opening of
business on the immediately following business day. All Letters of Credit under
this Agreement shall be conclusively presumed to have been made to, and at the
request of and for the benefit of, Borrowers when issued in accordance with the
instructions of a Borrower (including One Price for itself and/or on behalf of
One Price PR and/or on behalf of One Price VI) or in accordance with the terms
and conditions of this Agreement.
6.5 Appointment of One Price as Agent for One Price PR and One Price
VI. One Price PR and One Price VI hereby irrevocably appoint One Price, and
each officer thereof, as their agent and attorney-in-fact to request Letters of
Credit on their behalf, to receive notices and statements of account from
Bank, to take such other actions in their behalf as is provided hereunder and
generally to deal with Bank in their behalf, for all matters pertaining to the
credit arrangements under this Agreement.
SECTION 7. REPRESENTATIONS AND WARRANTIES
Borrowers hereby, jointly and severally, represent and warrant to Bank
the following (which shall survive the execution and delivery of this
Agreement), the truth and accuracy of which are a continuing condition of
providing Letters of Credit by Bank on behalf of Borrowers:
7.1 Corporate Existence, Power and Authority; Subsidiaries.
Each Borrower is a corporation duly organized and in good standing under the
laws of its state of incorporation
and is duly qualified as a foreign corporation and in good standing in all
states or other jurisdictions where the nature and extent of the business
transacted by it or the ownership of assets makes such qualification necessary,
except for those jurisdictions in which the failure to so qualify would not have
a material adverse effect on such Borrower's financial condition, results of
operation or business or the rights of Bank in or to any of the Transportation
Documents or Property. The execution, delivery and performance of this Agreement
and the transactions contemplated hereunder and thereunder are all within each
Borrower's corporate powers, have been duly authorized and are not in
contravention of law or the terms of any Borrower's certificate of
incorporation, by-laws, or other organizational documentation, or any indenture,
agreement or undertaking to which any Borrower is a party or by which any
Borrower or its or their property or properties are bound. This Agreement
constitutes a legal, valid and binding obligation of Borrowers enforceable in
accordance with its respective terms. Borrowers do not have any subsidiaries
except as set forth on Exhibit D attached hereto.
7.2 Financial Statements; No Material Adverse Change.
All financial statements relating to
Borrowers which have been or may hereafter be delivered by Borrowers to Bank
have been prepared in accordance with GAAP and fairly present the financial
condition and the results of operation of Borrowers as at the dates and for the
periods set forth therein. Except as disclosed in any interim financial
statements furnished by Borrowers to Bank prior to the date of this Agreement,
there has been no material adverse change in the assets, liabilities, properties
and condition, financial or otherwise, of the Borrowers on a consolidated basis,
since the date of the most recent audited financial statements furnished by
Borrowers to Bank prior to the date of this Agreement.
7.3 Chief Executive Office. The chief executive office of
each Borrower is located at the address set forth below.
7.4 Tax Returns. Each Borrower has filed, or caused to be
filed, in a timely manner all tax returns, reports and declarations which are
required to be filed by it, except where the failure to do so does not, and
could not reasonably be expected to, result in any Material Adverse Effect. All
information in such tax returns, reports and declarations is complete and
accurate in all material respects. Each Borrower has paid or caused to be paid
all taxes due and payable or claimed due and payable in any assessment received
by it, and has collected, deposited and remitted in accordance with all
applicable laws all sales and/or use taxes applicable to the conduct of its
business, except taxes the validity of which are being contested in good faith
by appropriate proceedings diligently pursued and available to such Borrower and
with respect to which adequate reserves have been set aside on its books.
Adequate provision has been made for the payment of all accrued and unpaid
Federal, State, county, local, foreign and other taxes whether or not yet due
and payable and whether or not disputed. Each Borrower has collected and
remitted when due to the appropriate tax authority all sales and/or use taxes
applicable to its business required to be collected under the laws of the United
States and each possession or territory thereof, and each State or political
subdivision thereof.
7.5 Litigation. Except as previously disclosed to Bank in
writing, there is no present investigation by any governmental agency pending,
or to the best of any Borrower's knowledge threatened, against or affecting any
Borrower, its assets or business and there is no action, suit, proceeding or
claim by any Person pending, or to the best of any Borrower's knowledge
threatened, against any Borrower or its assets or goodwill, or against or
affecting any transactions contemplated by this Agreement, which if adversely
determined against any Borrower would result in any material adverse change in
the assets, business or prospects of Borrowers on a consolidated basis, or would
impair the ability of any Borrower to perform its obligations hereunder or of
Bank to enforce any obligations or realize upon any Transportation Documents or
Property.
7.6 Compliance with Other Agreements and Applicable Laws
(a) No Borrower is in default in any respect under, or in
violation in any respect of any of the terms of, any material agreement,
contract, instrument, lease or other commitment to which it is a party or by
which it or any of its assets are bound, except for any such default or
violation which does not, and could not reasonably be expected to, result in a
Material Adverse Effect. Each Borrower is in compliance in all material respects
with the requirements of all applicable laws, rules, regulations and orders of
any governmental authority relating to its business, including, without
limitation, those set forth in or promulgated pursuant to the Occupational
Safety and Hazard Act of 1970, as amended, the Fair Labor Standards Act of 1938,
as amended, ERISA, the Code, as amended, and the rules and regulations
thereunder, all federal, state and local statutes, regulations, rules and orders
relating to consumer credit (including, without limitation, as each has been
amended, the Truth-in-Lending Act, the Fair Credit Billing Act, the Equal Credit
Opportunity Act and the Fair Credit Reporting Act, and regulations, rules and
orders promulgated thereunder), all federal, state and local states,
regulations, rules and orders pertaining to sales of consumer goods (including,
without limitation, the Consumer Products Safety Act of 1972, as amended, and
the Federal Trade Commission Act of 1914, as amended, and all regulations, rules
and orders promulgated thereunder).
(b) Each Borrower has obtained all material permits, licenses,
approvals, consents, certificates, orders or authorizations of any governmental
agency required for the lawful conduct of its business and is in compliance in
all material respects with the requirements of all applicable laws, rules,
regulations and orders of any governmental agency (including, but not limited
to, the Department of State, the Department of Commerce, the Bureau of Alcohol,
Tobacco and Firearms, and the Environmental Protection Agency) relating to its
business (including, without limitation, those set forth in or promulgated
pursuant to ERISA, the Occupational Safety and Hazard Act of 1970, as amended,
the Fair Labor Standards Act of 1938, as amended, the Code, and the
Environmental Laws). Each Borrower has all of the permits, licenses, approvals,
consents, certificates, orders or authorizations (the "Permits") issued by the
appropriate federal, state or local governmental agency necessary for each
Borrower to own and operate its business as presently conducted or proposed to
be conducted, except where the failure to have such Permits does not, and could
not reasonably be expected to, result in a Material Adverse Effect or any
adverse effect on the legality, validity or enforceability of this Agreement or
the ability of any Borrower to perform its obligations under the Agreement or
the rights and remedies of Bank under this Agreement. All of the Permits are
valid and subsisting and in full force and effect. There are no actions, claims
or proceedings pending or threatened that seek the revocation, cancellation,
suspension or modification of any of the Permits.
7.7 Accuracy and Completeness of InformationAccuracy and Completeness
of Information. All information furnished by or on behalf of any Borrower in
writing to Bank in connection with this Agreement or any transaction
contemplated hereby or thereby, including, without limitation, all information
in Borrowers' consolidated financial statement for the fiscal year ended
February 1, 1997, is true and correct in all material respects on the date as of
which such information is dated or certified and does not omit any material fact
necessary in order to make such information not misleading. No event or
circumstance has occurred which has had or could reasonably be expected to have
a material adverse affect on the business, assets or prospects of any Borrower,
which has not been fully and accurately disclosed to Bank in writing.
7.8 Interrelated BusinessInterrelated Business. One Price is the direct
and beneficial owner and holder of all of the issued and outstanding shares of
Capital Stock of One Price PR and of One Price VI. Borrowers share an identity
of interests such that any benefit received by any Borrower benefits the others.
Each Borrower (a) renders services to or for the benefit of other Borrowers, (b)
makes loans and advances and provides other financial accommodations to or for
the benefit of other Borrowers (including, inter alia, the payment and or
guaranties by one Borrower of indebtedness of another Borrower), and (c)
provides administrative, marketing, payroll and management services to or for
the benefit of other Borrowers. Borrowers have centralized purchasing,
collection, distribution, accounting, legal and other services.
7.9 Survival of Warranties; CumulativeSurvival of Warranties;
Cumulative. All representations and warranties contained in this Agreement shall
survive the execution and delivery of this Agreement and shall be deemed to have
been made again to Bank on the date of issuance of each Letter of Credit
hereunder and shall be conclusively presumed to have been relied on by Bank
regardless of any investigation made or information possessed by Bank. The
representations and warranties set forth herein shall be cumulative and in
addition to any other representations or warranties which Borrowers shall now or
hereafter give, or cause to be given, to Bank.
SECTION 8. AFFIRMATIVE AND NEGATIVE COVENANTS
8.1 Maintenance of Existence. Each Borrower
shall at all times preserve, renew and keep in full, force and effect its
corporate existence and rights and franchises with respect thereto and maintain
in full force and effect all permits, licenses, trademarks, tradenames,
approvals, authorizations, leases and contracts necessary to carry on the
business as presently or proposed to be conducted. Each Borrower shall give Bank
thirty (30) days prior written notice of any proposed change in its corporate
name, which notice shall set forth the new name and such Borrower shall deliver
to Bank a copy of the amendment to the Certificate of Incorporation of such
Borrower providing for the name change certified by the Secretary of State of
the jurisdiction of incorporation of such Borrower as soon as it is available.
8.2 Compliance with Laws, Regulations, Etc.
Each Borrower shall, at all times, comply in all material
respects with all laws, rules, regulations, licenses, permits, approvals and
orders applicable to it and duly observe all material requirements of any
Federal, State or local governmental authority, including, without limitation,
the Employee Retirement Security Act of 1974, as amended, the Occupational
Safety and Hazard Act of 1970, as amended, the Fair Labor Standards Act of 1938,
as amended.
8.3 Insurance. Each Borrower shall, at all times, maintain
with financially sound and reputable insurers insurance with respect to the
Property against loss or damage. The policies of insurance shall be satisfactory
to Bank as to form, amount and insurer. Each Borrower shall furnish
certificates, policies, or endorsements to Bank as Bank shall require as proof
of such insurance, and, if any Borrower fails to do so, Bank is authorized, but
not required, to obtain such insurance at the expense of Borrowers. Each
Borrower shall cause Bank to be named as a loss payee and an additional insured
(but without any liability for any premiums) under such insurance policies and
each Borrower shall obtain non-contributory lender's loss payable endorsements
for such policies in favor of Bank and Bank's interests with regard to Property
in form and substance satisfactory to Bank. Such lender's loss payable
endorsements shall specify that the proceeds of such insurance shall be payable
to Bank as its interests may appear with regard to Property and further specify
that Bank shall be paid regardless of any act or omission by any Borrower or any
of its affiliates. At its option, Bank may apply any insurance proceeds received
by Bank at any time to payment of the Obligations, whether or not then due, in
any order and in such manner as Bank may determine or hold such proceeds as cash
collateral for the Obligations.
8.4 Financial Statements and Other Information.
(a) Each Borrower shall keep proper books and records in which
true and complete entries shall be made of all dealings or transactions of or in
relation to the Property and the business of such Borrower and its subsidiaries
(if any) in accordance with GAAP and such Borrower shall furnish or cause to be
furnished to Bank: (i) within thirty (30) days after the end of each fiscal
month, except within forty-five (45) days after the end of each fiscal month
that coincides with the end of a fiscal quarter, monthly unaudited consolidated
financial statements, and, if a Borrower has any subsidiaries or any other
subsidiaries, unaudited consolidating financial statements (including in each
case balance sheets, statements of income and loss statements of cash flow and
statements of shareholders, equity), all in reasonable detail, fairly presenting
the financial position and the results of the operations of Borrowers and each
of their subsidiaries as of the end of and through such fiscal month and (ii)
within ninety (90) days after the end of each fiscal year, audited consolidated
financial statements (including in each case balance sheets, statements of
income and loss, statements of cash flow and statements of shareholders'
equity), and the accompanying notes thereto, all in reasonable detail, fairly
presenting the financial position and the results of the operations of Borrowers
and their subsidiaries as of the end of and for such fiscal year, together with
the opinion of independent certified public accountants, which accountants shall
be an independent accounting firm selected by Borrowers and reasonably
acceptable to Bank, that such financial statements have been prepared in
accordance with GAAP, and present fairly the results of operations and financial
condition of Borrowers and their subsidiaries as of the end of and for the
fiscal year then ended.
(b) Borrowers shall promptly notify Bank in writing of the
details of (i) any loss, damage, investigation, action, suit, proceeding or
claim relating to the Property, (ii) the occurrence of any Event of Default or
act, condition or event which, with the passage of time or giving of notice or
both, would constitute an Event of Default.
(c) Borrowers shall promptly after the sending or filing
thereof furnish or cause to be furnished to Bank copies of all reports which
Borrowers send to their stockholders generally and copies of all reports and
registration statements which Borrowers file with the Securities and Exchange
Commission, any national securities exchange or the National Association of
Securities Dealers, Inc.
(d) Borrowers shall furnish or cause to be furnished to Bank
such budgets, forecasts, projections and other information respecting the
Property and the business of Borrowers, as Bank may, from time to time,
reasonably request. Bank is hereby authorized to deliver a copy of any financial
statement or any other information relating to the business of Borrowers to any
court or other government agency or to any participant or assignee or
prospective participant or assignee. Borrowers hereby irrevocably authorizes and
directs all accountants or auditors to deliver to Bank, at Borrowers' expense,
copies of the financial statements of Borrowers and any reports or management
letters prepared by such accountants or auditors on behalf of Borrowers and to
disclose to Bank such information as they may have regarding the business of
Borrowers. Any documents, schedules, invoices or other papers delivered to Bank
may be destroyed or otherwise disposed of by Bank one year after the same are
delivered to Bank, except as otherwise designated by Borrowers to Bank in
writing.
8.5 Encumbrances. No Borrower shall create, incur, assume
or suffer to exist any security interest, mortgage, pledge, lien, charge or
other encumbrance of any nature whatsoever on any of the Property.
8.6 Adjusted Net Worth. Borrowers shall,
at all times, maintain Adjusted Net Worth of not less than $34,000,000.
8.7 Working Capital. Borrowers shall, at all
times, maintain Working Capital of not less than $5,000,000.
8.8 Costs and Expenses. Borrowers shall pay to Bank
on demand all costs, expenses, filing fees and taxes paid or payable in
connection with the preparation, negotiation, execution, delivery, recording,
administration, collection, liquidation, enforcement and defense of the
Obligations, Bank's rights in the Property, this Agreement, and all other
documents related hereto or thereto, including any amendments, supplements or
consents which may hereafter be contemplated (whether or not executed) or
entered into in respect hereof and thereof, including, but not limited to: (a)
all costs and expenses of filing or recording (including Uniform Commercial Code
financing statement filing taxes and fees, documentary taxes, intangibles taxes,
if applicable); (b) charges, fees or expenses charged by Bank in connection with
the Letters of Credit; (c) costs and expenses of preserving and protecting the
Property; (d) costs and expenses paid or incurred in connection with obtaining
payment of the Obligations, enforcing the rights of Bank in the Property,
selling or otherwise realizing upon the Property, and otherwise enforcing the
provisions of this Agreement or defending any claims made or threatened against
Bank arising out of the transactions contemplated hereby and thereby (including,
without limitation, preparations for and consultations concerning any such
matters); (e) the reasonable fees and disbursements of counsel (including legal
assistants) to Bank in connection with any of the foregoing.
8.9 Further Assurances. At the request of Bank at any
time and from time to time, Borrowers shall, at Borrowers' expense, duly execute
and deliver, or cause to be duly executed and delivered, such further
agreements, documents and instruments, and do or cause to be done such further
acts as may be necessary or proper to evidence, perfect, maintain and enforce
the rights of Bank in the Property and to otherwise effectuate the provisions or
purposes of this Agreement. Bank may at any time and from time to time request a
certificate from an officer of each Borrower representing that all conditions
precedent to issuing a Letter of Credit pursuant hereto are satisfied. In the
event of such request by Bank, Bank may, at its option, if such certificate has
not been delivered within five (5) days after such request, cease to issue any
further Letters of Credit until Bank has received such certificate and, in
addition, Bank has determined that such conditions are satisfied. Where
permitted by law, each of Borrowers hereby authorizes Bank to execute and file
one or more UCC financing statements related to the Property signed only by
Bank.
SECTION 9. EVENTS OF DEFAULT AND REMEDIES
9.1 Events of Default. The occurrence or existence of
any one or more of the following events are referred to herein individually as
an "Event of Default", and collectively as "Events of Default":
(a) (i) any Borrower fails to pay when due any of the
Obligations or (ii) any Borrower or any obligor fails to perform any of the
terms, covenants, conditions or provisions contained in this Agreement and such
failure shall continue for twenty (20) days; provided, that, such twenty (20)
day period shall not apply in the case of: (A) any failure to observe any such
term, covenant, condition or provision which is not capable of being cured at
all or within such twenty (20) day period or which has been the subject of a
prior failure within a six (6) month period or (B) an intentional breach by any
Borrower or any Obligor of any such term, covenant, condition or provision, or
(C) the failure to observe or perform any of the covenants or provisions
contained in Sections 8.1, 8.3 or 8.5 of this Agreement; or
(b) any representation, warranty or statement of fact made by
any Borrower to Bank in this Agreement, or any other agreement, schedule,
confirmatory assignment or otherwise shall when made or deemed made be false or
misleading in any material respect;
(c) any Obligor revokes, terminates or fails to perform any of
the terms, covenants, conditions or provisions of any guarantee, endorsement or
other agreement of such party in favor of Bank;
(d) a case or proceeding under the bankruptcy laws of the
United States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law or
in equity) is filed against any Borrower or any Obligor or all or any part of
its properties and such petition or application is not dismissed within thirty
(30) days after the date of its filing or any Borrower or any Obligor shall file
any answer admitting or not contesting such petition or application or indicates
its consent to, acquiescence in or approval of, any such action or proceeding or
the relief requested is granted sooner;
(e) a case or proceeding under the bankruptcy laws of the
United States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at a law
or equity) is filed by any Borrower or any Obligor or for all or any part of its
property;
(f) any act, condition or event shall exist or shall have
occurred that results in a Material Adverse Effect relating to the Property or
Bank's rights or interests in or with respect to the Property; or
(g) an Event of Default occurs under the Congress Agreement.
9.2 Remedies.
(a) At any time an Event of Default exists or has occurred and
is continuing, Borrowers shall pay to Bank interest at the Default Rate on the
aggregate amount of all unpaid amounts due to Bank pursuant to Section 2.1(e).
(b) At any time an Event of Default exists or has occurred and
is continuing, Bank shall have all rights and remedies provided in this
Agreement, the Uniform Commercial Code and other applicable law, all of which
rights and remedies may be exercised without notice to or consent by any
Borrower or any Obligor, except as such notice or consent is expressly provided
for hereunder or required by applicable law. All rights, remedies and powers
granted to Bank hereunder, the Uniform Commercial Code or other applicable law,
are cumulative, not exclusive, and are enforceable, in Bank's discretion,
alternatively, successively, or concurrently on any one or more occasions, and
shall include, without limitation, the right to apply to a court of equity for
an injunction to restrain a breach or threatened breach by any Borrower of this
Agreement. Bank may, at any time or times, proceed directly against any Borrower
or any Obligor to collect the Obligations without prior recourse to the
Property.
(c) Without limiting the foregoing, at any time an Event of
Default exists or has occurred and is continuing, Bank may, in its discretion
and without limitation, (i) accelerate the payment of all Obligations and demand
immediate payment thereof to Bank (provided, that, upon the occurrence of any
Event of Default described in Sections 9.1(d) and 9.1(e), all Obligations shall
automatically become immediately due and payable), (ii) with or without judicial
process or the aid or assistance of others, present the Transportation Documents
to any port, shipper or freight line service where any of the Property may be
located and take possession of the Property, (iii) collect, foreclose, receive,
appropriate, setoff and realize upon any and all of the Property, (iv) remove
any or all of the Property from any premises on or in which the same may be
located for the purpose of effecting the sale or other disposition thereof or
for any other purpose, (v) sell, lease, transfer, assign, deliver or otherwise
dispose of any and all of the Property (including, without limitation, entering
into contracts with respect thereto, public or private sales at any exchange,
broker's board, at any office of Bank or elsewhere) at such prices or terms as
Bank may deem reasonable, for cash, upon credit or for future delivery, with the
Bank having the right to purchase the whole or any part of the Property at any
such public sale, all of the foregoing being free from any right or equity of
redemption of any Borrower, which right or equity of redemption is hereby
expressly waived and released by each Borrower and/or (vi) terminate this
Agreement. If any of the Property is sold or leased by Bank upon credit terms or
for future delivery, the Obligations shall not be reduced as a result thereof
until payment therefor is finally collected by Bank. If notice of disposition of
the Property is required by law, five (5) days prior notice by Bank to Borrowers
designating the time and place of any public sale or the time after which any
private sale or other intended disposition of the Property is to be made, shall
be deemed to be reasonable notice thereof to Borrowers and each Borrower waives
any other notice. In the event Bank institutes an action to recover any of the
Property or seeks recovery of any of the Property by way of prejudgment remedy,
each Borrower waives the posting of any bond which might otherwise be required.
(d) Bank may apply the cash proceeds of the Property actually
received by Bank from any sale, lease, foreclosure or other disposition of the
Property to payment of the Obligations, in whole or in part and in such order as
Bank may elect, whether or not then due. Each Borrower shall remain liable to
Bank for the payment of any deficiency with interest at the Default Rate and all
costs and expenses of collection or enforcement, including reasonable attorneys'
fees and legal expenses.
(e) Without limiting the foregoing, upon the occurrence of an
Event of Default or an event which with notice or passage of time or both would
constitute an Event of Default, Bank may, at its option, without notice, (i)
cease issuing Letters of Credit and/or (ii) terminate any provision of this
Agreement providing for any future Letters of Credit to be made by Bank on
behalf of Borrowers.
SECTION 10. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW;
10.1 Governing Law; Choice of Forum; Service of Process;
Jury Trial Waiver.
(a) The validity, interpretation and enforcement of this
Agreement and any dispute arising out of the relationship between the parties
hereto, whether in contract, tort, equity or otherwise, shall be governed by the
internal laws of the State of South Carolina (without giving effect to
principles of conflicts of law).
(b) Each Borrower and Bank irrevocably consent and submit to
the non-exclusive jurisdiction of the Circuit Court of Greenville County, South
Carolina and the United States District Court for the District of South Carolina
and waive any objection based on venue or forum non conveniens with respect to
any action instituted therein arising under this Agreement or in any way
connected with or related or incidental to the dealings of the parties hereto in
respect of this Agreement or the transactions related hereto or thereto, in each
case whether now existing or hereafter arising, and whether in contract, tort,
equity or otherwise, and agree that any dispute with respect to any such matters
shall be heard only in the courts described above (except that Bank shall have
the right to bring any action or proceeding against a Borrower or the Property
in the courts of any other jurisdiction which Bank deems necessary or
appropriate in order to realize on the Property or to otherwise enforce its
rights against such Borrower or the Property).
(c) Each Borrower hereby waives personal service of any and
all process upon it and consents that all such service of process may be made by
certified mail (return receipt requested) directed to its address set forth on
the signature pages hereof and service so made shall be deemed to be completed
five (5) days after the same shall have been so deposited in the U.S. mails, or,
at Bank's option, by service upon Borrowers in any other manner provided under
the rules of any such courts. Within thirty (30) days after such service, such
Borrowers shall appear in answer to such process, failing which Borrowers shall
be deemed in default and judgment may be entered by Bank against Borrowers for
the amount of the claim and other relief requested.
(d) EACH BORROWER AND BANK HEREBY WAIVE ANY RIGHT TO TRIAL BY
JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS
AGREEMENT OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE
DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR THE TRANSACTIONS
RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. EACH BORROWER AND
BANK HEREBY AGREE AND CONSENT THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY BORROWER OR
BANK MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT
AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR
RIGHT TO TRIAL BY JURY.
(e) Bank shall not have any liability to any Borrower (whether
in tort, contract, equity or otherwise) for losses suffered by any Borrower in
connection with, arising out of, or in any way related to the transactions or
relationships contemplated by this Agreement, or any act, omission or event
occurring in connection herewith, unless it is determined by a final and
non-appealable judgment or court order binding on Bank, that the losses were the
result of acts or omissions constituting gross negligence or willful misconduct.
In any such litigation, Bank shall be entitled to the benefit of the rebuttable
presumption that it acted in good faith and with the exercise of ordinary care
in the performance by it of the terms of this Agreement.
10.2 Waiver of Notices. Each Borrower hereby expressly
waives demand, presentment, protest and notice of protest and notice of dishonor
with respect to any and all instruments and commercial paper, included in or
evidencing any of the obligations or the Property, and any and all other demands
and notices of any kind or nature whatsoever with respect to the Obligations,
the Property and this Agreement, except such as are expressly provided for
herein. No notice to or demand on any Borrower which Bank may elect to give
shall entitle Borrowers to any other or further notice or demand in the same,
similar or other circumstances. Without limiting the generality of the
foregoing, each Borrower waives (i) notice prior to Bank's taking possession or
control of any of the Property or any bond or security which might be required
by any court prior to allowing Bank to exercise any of Bank's remedies,
including the transfer into Bank's name the Property or the Transportation
Documents, or the issuance of an immediate writ of possession, and (ii) the
benefit of any valuation, appraisement and exemption laws.
10.3 Amendments and Waivers. Neither this
Agreement nor any provision hereof shall be amended, modified, waived or
discharged orally or by course of conduct, but only by a written agreement
signed by an authorized officer of Bank. Bank shall not, by any act, delay,
omission or otherwise be deemed to have expressly or impliedly waived any of its
rights, powers and/or remedies unless such waiver shall be in writing and signed
by an authorized officer of Bank. Any such waiver shall be enforceable only to
the extent specifically set forth therein. A waiver by Bank of any right, power
and/or remedy on any one occasion shall not be construed as a bar to or waiver
of any such right, power and/or remedy which Bank would otherwise have on any
future occasion, whether similar in kind or otherwise.
10.4 Waiver of Counterclaims. Each Borrower
waives all rights to interpose any claims, deductions, setoffs or counterclaims
of any nature (other then compulsory counterclaims) in any action or proceeding
with respect to this Agreement, the Obligations, the Property or any matter
arising therefrom or relating hereto or thereto.
10.5 Indemnification. Each Borrower shall indemnify and
hold Bank, and its directors, agents, employees and counsel, harmless from and
against any and all losses, claims, damages, liabilities, costs or expenses
imposed on, incurred by or asserted against any of them in connection with any
litigation, investigation, claim or proceeding commenced or threatened related
to the negotiation, preparation, execution, delivery, enforcement, performance
or administration of this Agreement, or any undertaking or proceeding related to
any of the transactions contemplated hereby or any act, omission, event or
transaction related or attendant thereto, including, without limitation, amounts
paid in settlement, court costs, and the fees and expenses of counsel. To the
extent that the undertaking to indemnify, pay and hold harmless set forth in
this Section may be unenforceable because it violates any law or public policy,
each Borrower shall pay the maximum portion which it is permitted to pay under
applicable law to Bank in satisfaction of indemnified matters under this
Section. The foregoing indemnity shall survive the payment of the Obligations
and the termination or non-renewal of this Agreement.
SECTION 11. TERM OF AGREEMENT: MISCELLANEOUS
11.1 Term
(a) This Agreement shall become effective as of the date set
forth on the first page hereof and shall continue in full force and effect for a
term ending on the earlier of (i) June 30, 1998 or (ii) the termination of the
Congress Agreement. At the end of the Term, Borrowers shall have paid to Bank,
in full, all outstanding and unpaid Obligations and shall furnish cash
collateral to Bank in such amounts as Bank determines are reasonably necessary
to secure Bank from loss, cost, damage or expense, including attorneys' fees and
legal expenses, in connection with any contingent obligations, including issued
and outstanding Letters of Credit and checks or other payments provisionally
credited to the Obligations and/or as to which Bank has not yet received final
and indefeasible payment. Such payments and cash collateral shall be remitted by
wire transfer in Federal funds to such bank account of Bank, as Bank may, in its
discretion, designate in writing to Borrowers for such purpose. Interest at the
Default Rate shall accrue on all unpaid Obligations not satisfied as of the end
of the Term and shall be due until and including the next business day, if the
amounts so paid by Borrowers to the bank account designated by Bank are received
in such bank account later than 12:00 noon, Greenville, South Carolina time.
(b) No termination of this Agreement shall relieve or
discharge any Borrower of its respective duties, obligations and covenants under
this Agreement until all Obligations have been fully and finally discharged and
paid, and Bank's continuing rights in the Property and the rights and remedies
of Bank hereunder, and under applicable law, shall remain in effect until all of
the Obligations have been fully and finally discharged and paid.
11.2 Uniform Customs and Practice. Except
as otherwise expressly provided in this Agreement or as Borrowers and Bank may
otherwise expressly agree with regard to, and prior to the issuance of, a Letter
of Credit, the Uniform Customs and Practice for Documentary Credits (1993
Revision), International Chamber of Commerce Publication No. 500 shall in all
respects be deemed a part of this Agreement as fully as if incorporated herein
and shall apply to the Letters of Credit.
11.3 Notices. All notices, requests and demands hereunder shall
be in writing and (a) made to Bank at its address set forth below and to each
Borrower at its chief executive office set forth below, or to such other address
as either party may designate by written notice to the other in accordance with
this provision, and (b) deemed to have been given or made: if delivered in
person, immediately upon delivery; if by telex, telegram or facsimile
transmission, immediately upon sending and upon confirmation of receipt; if by
nationally recognized overnight courier service with instructions to deliver the
next business day, one (1) business day after sending; and if by certified mail,
return receipt requested, five (5) days after mailing.
11.4 Partial Invalidity. If any provision of this
Agreement is held to be invalid or unenforceable, such invalidity or
unenforceability shall not invalidate this Agreement as a whole, but this
Agreement shall be construed as though it did not contain the particular
provision held to be invalid or unenforceable and the rights and obligations of
the parties shall be construed and enforced only to such extent as shall be
permitted by applicable law.
11.5 Successors. This Agreement, and any other document
referred to herein shall be binding upon and inure to the benefit of and be
enforceable by Bank, Borrowers and their respective successors and assigns,
except that Borrowers may not assign their rights under this Agreement, and any
other document referred to herein without the prior written consent of Bank.
Bank may, after notice to Borrowers, assign its rights and delegate its
obligations under this Agreement and further may assign, or sell participations
in, all or any part of the Letters of Credit or any other interest herein to
another financial institution or other person, in which event, the assignee or
participant shall have, to the extent of such assignment or participation, the
same rights and benefits as it would have if it were the Bank hereunder, except
as otherwise provided by the terms of such assignment or participation.
11.6 Confidentiality.
(a) Bank shall use all reasonable efforts to keep
confidential, in accordance with its customary procedures for handling
confidential information and safe and sound lending practices, any non-public
information supplied to it by Borrowers pursuant to this Agreement which is
clearly and conspicuously marked as confidential at the time such information is
furnished by a Borrower to Bank, provided, that, nothing contained herein shall
limit the disclosure of any such information: (i) to the extent required by
statute, rule, regulation, subpoena or court order, (ii) to bank examiners and
other regulators, auditors and/or accountants, (iii) in connection with any
litigation to which Bank is a party, (iv) to any assignee or participant (or
prospective assignee or participant) so long as such assignee or participant (or
prospective assignee or participant) shall have first agreed in writing to treat
such information as confidential in accordance with this Section 11.6, or (v) to
counsel for Bank or any participant or assignee (or prospective participant or
assignee).
(b) In no event shall this Section 11.6 or any other provision
of this Agreement or applicable law be deemed: (i) to apply to or restrict
disclosure of information that has been or is made public by a Borrower or any
third party without breach of this Section 11.6 or otherwise become generally
available to the public other than as a result of a disclosure in violation
hereof, (ii) to apply to or restrict disclosure of information that was or
becomes available to Bank on a non-confidential basis from a person other than a
Borrower, (iii) require Bank to return any materials furnished by a Borrower to
Bank or (iv) prevent Bank from responding to routine informational requests in
accordance with the Code of Ethics for the Exchange of Credit Information
promulgated by The Robert Morris Associates or other applicable industry
standards relating to the exchange of credit information. The obligations of
Bank under this Section 11.6 shall supersede and replace the obligations of Bank
under any confidentiality letter signed prior to the date hereof.
11.7 Entire Agreement. This Agreement, any supplements
hereto, and any instruments or documents delivered or to be delivered in
connection herewith represents the entire agreement and understanding concerning
the subject matter hereof and thereof between the parties hereto, and supersede
all other prior agreements, understandings, negotiations and discussions,
representations, warranties, commitments, proposals, offers and contracts
concerning the subject matter hereof, whether oral or written.
<PAGE>
IN WITNESS WHEREOF, Bank and each of Borrowers have caused these
presents to be duly executed as of the day and year first above written.
<TABLE>
<S> <C> <C>
BANK BORROWERS
CAROLINA FIRST BANK ONE PRICE CLOTHING STORES, INC.
By: Charles D. Chamberlain By: C. Burt Duren
Title: Executive Vice President Title: Treasurer
Address: Chief Executive Office:
International Department 1875 East Main Street
1225 Lady Street Duncan, South Carolina 29334
Columbia, South Carolina 29201 Telephone No. (864) 486-6222
Telephone No. (803) 540-2714 Facsimile No. (864) 486-6107
Facsimile No. (803) 540-2718
ONE PRICE CLOTHING OF PUERTO
RICO, INC.
By: C. Burt Duren
Title: Treasurer
Chief Executive Office:
1875 East Main Street
Duncan, South Carolina 29334
ONE PRICE CLOTHING - U.S. VIRGIN
ISLANDS, INC.
By: C. Burt Duren
Title: Treasurer
Chief Executive Office:
1875 East Main Street
Duncan, South Carolina 29334
</TABLE>
<PAGE>
ONE PRICE CLOTHING STORES, INC. AND SUBSIDIARIES
EXHIBIT 10(c) - Stock Option Agreement dated March 26, 1997 between the
Registrant and Larry I. Kelley
ONE PRICE CLOTHING STORES, INC.
STOCK OPTION AGREEMENT
Name of Optionee: Larry I. Kelley
Date of Grant: March 26, 1997
Number of shares subject to Options: 300,000
Exercise price per share: $4.125
Option expires and is no longer valid on or after: April 24, 2007 unless an
earlier date of expiration occurs pursuant to the terms set forth below
The Options shall be exercisable according to the following schedule (subject to
adjustment as provided below):
75,000 Shares Beginning April 24, 1997 56,250 Shares Beginning
April 24, 1998 56,250 Shares Beginning April 24, 1999 56,250
Shares Beginning April 24, 2000 56,250 Shares Beginning April
24, 2001
An Option that becomes exercisable in whole or in part according to the
foregoing schedule may be exercised subsequently at any time prior to its
scheduled expiration, subject to earlier termination as described below.
Additional Option Terms:
The Options shall not be transferable except to members of the
Optionee's immediate family or a trust for the benefit of members of his family.
Any unexercised Option shall terminate on the date the Optionee ceases
to be an employee of One Price Clothing Stores, Inc. (the "Company") or a
subsidiary of the Company, unless the Optionee shall (a) die while an employee
of the Company, in which case his legatees under his last will or his personal
representative or representatives may exercise the previously unexercised
portion of the Options at any time within one (1) year after his death to the
extent the Optionee could have exercised such Options as of the April 24th next
following his death; (b) becomes permanently or totally disabled within the
meaning of Section 22(e)(3) of the Internal Revenue Code of 1986, as amended
(the "Code") (or any successor provision), in which case he or his personal
representative may exercise the previously unexercised portion of the Options at
any time within one (1) year after termination of his employment to the extent
the Optionee could have exercised such Options as of the April 24th next
following his termination of employment; or (c) resign or retire with the
consent of the Company or be terminated without Cause (as defined in that
certain Employment Agreement by and between the Company and Mr. Kelley dated
March 26, 1997 (the "Employment Agreement")), in which case he may exercise the
previously unexercised but then exercisable portion of the Options at any time
within three (3) months after his resignation, retirement or termination without
Cause. In no event may the Options be exercised after the expiration of their
fixed term.
An Option shall be deemed exercised when the holder (a) shall indicate
the decision to do so in writing delivered to the Company, (b) shall at the same
time tender to the Company payment in full in cash (or in shares of the
Company's Common Stock at the value of such shares at the time of exercise ) of
the exercise price for the shares for which the Option is exercised, (c) shall
tender to the Company payment in full in cash of the amount of all federal and
state withholding or other employment taxes applicable to the taxable income,
<PAGE>
if any, of Mr. Kelley resulting from such exercise, and (d) shall comply with
such other reasonable requirements as the Board or Compensation Committee of the
Board (the "Committee") may establish. The Optionee shall not have any of the
rights of a shareholder with reference to shares subject to an Option until a
certificate for the shares has been executed and delivered.
An Option may be exercised for any lesser number of shares than the
full amount for which it could be exercised. Such a partial exercise of an
Option shall not affect the right to exercise the Options from time to time in
accordance with this agreement for the remaining shares subject to the Options.
The number and kind of shares subject to Options hereunder and/or the
exercise price will be appropriately adjusted by the Committee in the event of
any change in the outstanding stock of the Company by reason of stock dividend,
stock split, recapitalization, reorganization, merger, split up or the like.
Such adjustment shall be designed to preserve, but not increase, the benefits to
the Optionee. The determinations of the Committee as to what adjustments shall
be made, and the extent thereof, shall be final, binding and conclusive.
No certificate(s) for shares shall be executed or delivered upon
exercise of an Option until the Company shall have taken such action, if any, as
is then required to comply with the provisions of the Securities Act of 1933, as
amended, the Securities Exchange Act of 1934, as amended, the South Carolina
Uniform Securities Act, as amended, any other applicable state blue sky law(s)
and the requirements of any exchange on which the Company's Common Stock may, at
the time, be listed. Promptly following the date hereof, the Company will
register with the United State Securities and Exchange Commission on a Form S-8
the shares underlying the Options and take other steps as it deems necessary or
appropriate in order that the shares covered hereby may be lawfully issued. In
the case of the exercise of an Option by a person or estate acquiring the right
to exercise the Option by bequest or inheritance, the Board or Committee may
require reasonable evidence as to the ownership of the Option and may require
such consents and releases of taxing authorities as it may deem advisable.
Nothing in this Agreement shall in any way alter any of the rights or
duties of the Company or the Optionee under the Employment Agreement.
By the Optionee's and the Company's signatures below, the Optionee and
the Company agree that this Option is granted under and governed by the terms
and conditions of this agreement.
<TABLE>
<S> <C>
ONE PRICE CLOTHING STORES, INC.
By: /s/ Henry D. Jacobs, Jr.
Title: Chairman of the Board
WITNESS: /s/ Diane G. O'Bryant
OPTIONEE:
/s/ Larry I. Kelley
Larry I. Kelley
</TABLE>
<PAGE>
ONE PRICE CLOTHING STORES, INC. AND SUBSIDIARIES
EXHIBIT 11 -- Computation of Per Share Earnings
<TABLE>
<S> <C> <C>
Three-Month Period Ended
May 3, May 4,
1997 1996
PRIMARY INCOME PER COMMON SHARE
Weighted average number of common shares outstanding 10,435,531 10,335,031
Net effect of dilutive stock options -based on the treasury
stock method using the average market price 28,931 8,915
TOTAL 10,464,462 10,343,946
Net income $1,444,000 $1,237,000
Net income per common share $ 0.14 $ 0.12
FULLY DILUTED INCOME PER COMMON SHARE
Weighted average number of common shares outstanding 10,435,531 10,335,031
Net effect of dilutive stock options - based on the treasury
stock method using the greater of ending or average
market price 28,931 27,177
TOTAL 10,464,462 10,362,208
Net income $1,444,000 $1,237,000
Net income per common share $ 0.14 $ 0.12
</TABLE>
<PAGE>
ONE PRICE CLOTHING STORES, INC. AND SUBSIDIARIES
EXHIBIT 15 -- ACKNOWLEDGMENT OF DELOITTE & TOUCHE LLP,
INDEPENDENT ACCOUNTANTS
One Price Clothing Stores, Inc. and Subsidiaries
Duncan, South Carolina
We have made a review, in accordance with standards established by the American
Institute of Certified Public Accountants, of the unaudited interim condensed
consolidated financial information of One Price Clothing Stores, Inc. and
subsidiaries for the three-month periods ended May 3, 1997 and May 4, 1996, as
indicated in our report dated May 29, 1997; because we did not perform an audit,
we expressed no opinion on that information.
We are aware that our report referred to above, which is included in your
Quarterly Report on Form 10-Q for the quarter ended May 3, 1997, is incorporated
by reference in Registration Statements No. 33-20529, 33-31623, 33-48091, and
33-61803 on Form S-8 pertaining to the 1987 Stock Option Plan, the 1988 Stock
Option Plan, the 1991 Stock Option Plan, and the Director Stock Option Plan,
respectively, of One Price Clothing Stores, Inc.
We also are aware that the aforementioned report, pursuant to Rule 436(c) under
the Securities Act of 1933, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that Act.
DELOITTE & TOUCHE LLP
Greenville, South Carolina
June 13, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> MAY-03-1997
<CASH> 2996
<SECURITIES> 0
<RECEIVABLES> 2929
<ALLOWANCES> 0
<INVENTORY> 53839
<CURRENT-ASSETS> 67423
<PP&E> 58305
<DEPRECIATION> 22533
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0
0
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</TABLE>
